the changes in the adjustment for non-financial risk between the
inception date and the transition date can be estimated based on
release patterns observed on similar contracts.
For liabilities for remaining coverage that are reconstituted in this way
at the inception date, the contractual service margin at inception (if
any), less any acquisition costs paid in the interim period, is amortised
based on the services provided in the period prior to the transition, in
order to determine the amount of the remaining contractual service
margin at that date, less any remaining acquisition costs.
When contracts are grouped into a single group on the transition date,
the discount rate on that date or an average rate can be used.
The effect of the change in the discount rate on liabilities is recognised
in the profit and loss account, unless the option to split financial
changes between profit and loss and shareholders' equity is retained.
Choosing this option requires the amount carried in shareholders'
equity at the transition date to be recalculated from the inception
rate for the liability for remaining coverage and from the rate at the
date of claims occurrence for the liability for incurred claims. Where
such reconstitution is not possible, the amount shown in equity is zero.
For the purposes of this reconstitution, the simplifications mainly
reconstitution of the annual cohorts or consolidation into a single
group of contracts at the transition date according to available data;
the reconstitution of fulfilment cash flows and unamortised
the release of the risk adjustment between the date of issuance of
the contracts and the transition date;
discount rates (the rate at inception in the case of a reconstitution
by annual cohorts or an average rate in the case of a consolidation
into a single group of contracts at the transition date);
the amount transferred to changes in equity that may be reclassified
to profit or loss at the transition date in respect of changes in the
discount rate, that was reconstituted based on historical rates or
reset to zero if such a reconstitution is not achievable.
For Protection contracts valued according to the simplified method,
the reserves for remaining coverage were generally determined at
transition from the previous reserves for unearned premiums, net
of acquisition costs. The incurred claims reserves arising from these
contracts consist of expected cash flows and risk adjustments for
non-financial risks at the transition date. When cash flows were
discounted and for portfolios for which the disaggregation option of
financial changes between profit and loss account and shareholders'
equity was chosen, the amount carried in changes in equity that may
be reclassified to profit or loss at the transition date in relation to
changes in the discount rate was reconstituted based on the historical
rates or set to zero if such a reconstitution was not achievable.
For Life/Savings contracts valued under the variable fee approach,
the modified retrospective approach also consists in reconstituting the
liability at the inception date, starting from the liability at the transition
date. However, for these contracts, the standard provides that the
contractual services margin at the transition date is determined using
the realisable value of the underlying assets at the transition date
is first diminished by the fulfilment cash flows (discounted cash
flows and risk adjustment) at that date;
to this amount are added the income received from the policyholders
and changes in the risk adjustment, less the acquisition cashflows
paid during the interim period;
the contractual service margin net of the acquisition costs initially
reconstituted is then amortised until the transition date to reflect
the services provided to that date, as well as the remaining
The main simplifications in implementing this approach were as
existing contracts were grouped according to the planned post-
transition segmentation, without a breakdown in annual cohorts, in
line with the election of the exemption provided for by the European
for general funds common to participating and non-participating
contracts and to equity, the underlying assets were defined on the
basis of the breakdown used to calculate policyholders' participation;
the contractual services margin at the transition date was
based on the fair value of the underlying assets less fulfilment
cash flows at the transition date;
by adding the historical margins which were rolled over up to
the transition date, using the same approach as that to be used
after the transition, taking into account the \"over-performance\"
deducting any remaining acquisition costs;
the amount recorded in changes in equity that may be reclassified to
profit or loss at the transition date as an adjustment for accounting
mismatches was determined using the fair value of the underlying
assets recognised in equity at the transition date.
Finally, under the fair value method, the contractual service margin at
the transition date was determined as the difference at the transition
date between the realisable value determined without taking into
account the amount payable on demand and the fulfilment cash flows.
This approach was used on some non-material portfolios when the
modified retrospective approach could not be implemented. For these
portfolios, the fair value was estimated based on a Solvency 2 valuation
and, in the particular case of a recent business combination dating
from 2018, based on the amount allocated to the contracts during the
acquisition price allocation process.
Transition from IAS 39 to IFRS 9
Financial assets and liabilities of insurance entities are managed by
portfolios corresponding either to the insurance liabilities they back up
or to the own funds. The business models were therefore determined
according to these portfolios at the transition date to IFRS 9 (see
note 2 IFRS 17 and IFRS 9 First time application impacts).
1.f.1 Financialassets at amortised cost
Financial assets are classified at amortised cost if the following two
criteria are met: the business model objective is to hold the instrument
in order to collect the contractual cash flows and the cash flows consist
solely of payments relating to principal and interest on the principal.
Financial assets are managed within a business model whose objective
is to hold financial assets in order to collect cash flows through the
collection of contractual payments over the life of the instrument.
The realisation of disposals close to the maturity of the instrument
and for an amount close to the remaining contractual cash flows, or
due to an increase in the counterparty's credit risk is consistent with a
business model whose objective is to collect the contractual cash flows
(\"collect\"). Sales imposed by regulatory requirements or to manage the
concentration of credit risk (without an increase in the asset's credit risk)
are also consistent with this business model when they are infrequent
or insignificant in value.
The cash flow criterion is satisfied if the contractual terms of the debt
instrument give rise, on specified dates, to cash flows that are solely
repayments of principal and interest on the principal amount outstanding.
The criterion is not met in the event of a contractual characteristic that
exposes the holder to risks or to the volatility of contractual cash flows
that are inconsistent with those of a non-structured or \"basic lending\"
arrangement. It is also not satisfied in the event of leverage that increases
the variability of the contractual cash flows.
Interest consists of consideration for the time value of money, for the
credit risk, and for the remuneration of other risks (e.g. liquidity risk),
costs (e.g. administration fees), and a profit margin consistent with that
of a basic lending arrangement. The existence of negative interest does
not call into question the cash flow criterion.
The time value of money is the component of interest - usually referred
to as the \"rate\" component - which provides consideration for only the
passage of time. The relationship between the interest rate and the
passage of time must not be modified by specific characteristics that
could call into question the respect of the cash flow criterion.
Thus, when the variable interest rate of the financial asset is periodically
reset at a frequency that does not match the duration for which the
interest rate is established, the time value of money may be considered
as modified and, depending on the significance of that modification, the
cash flow criterion may not be met. Some financial assets held by the
Group present a mismatch between the interest rate reset frequency
and the maturity of the index, or interest rates indexed to an average of
benchmark rate. The Group has developed a consistent methodology for
analysing this alteration of the time value of money.
Regulated rates meet the cash flow criterion when they provide
consideration that is broadly consistent with the passage of time and do
not expose to risks or volatility in the contractual cash flows that would
be inconsistent with those of a basic lending arrangement (example:
loans granted in the context of Livret A savings accounts).
Some contractual clauses may change the timing or the amount of cash
flows. Early redemption options do not call into question the cash flow
criterion if the prepayment amount substantially represents the principal
amount outstanding and the interest thereon, which may include
reasonable compensation for the early termination of the contract. For
example, as regards loans to retail customers, the compensation limited
to 6 months of interest or 3% of the capital outstanding is considered
reasonable. Actuarial penalties, corresponding to the discounted value
of the difference between the residual contractual cash flows of the
loan, and their reinvestment in a loan to a similar counterparty or in
the interbank market for a similar residual maturity are also considered
as reasonable, even when the compensation can be positive or negative
(i.e. \"symmetric\" compensation). An option that permits the issuer or
the holder of a financial instrument to change the interest rate from
floating to fixed rate does not breach the cash flow criterion if the fixed
rate is determined at origination, or if it represents the time value of
money for the residual maturity of the instrument at the date of exercise
of the option. Clauses included in financing granted to encourage the
sustainable development of companies which adjust the interest margin
depending on the achievement of environmental, social or governance
(ESG) objectives and disclosed in chapter 7 of the Universal registration
document, do not call into question the cash flow criterion when such an
adjustment is considered to be minimal. Structured instruments indexed
to ESG market indices do not meet the cash flow criterion.
In the particular case of financial assets contractually linked to payments
received on a portfolio of underlying assets and which include a priority
order for payment of cash flows between investors (\"tranches\"), thereby
creating concentrations of credit risk, a specific analysis is carried out.
The contractual characteristics of the tranche and those of the underlying
financial instrument portfolios must meet the cash flow criterion and the
credit risk exposure of the tranche must be equal to or lower than the
exposure to credit risk of the underlying pool of financial instruments.
Certain loans may be \"non-recourse\", either contractually, or in substance
when they are granted to a special purpose entity. That is in particular
the case of numerous project financing or asset financing loans. The
cash flow criterion is met as long as these loans do not represent a
direct exposure on the assets acting as collateral. In practice, the sole
fact that the financial asset explicitly gives rise to cash flows that are
consistent with payments of principal and interest is not sufficient to
conclude that the instrument meets the cash flow criterion. In that case,
the particular underlying assets to which there is limited recourse shall
be analysed using the \"look-through\" approach. If those assets do not
themselves meet the cash flow criterion, the existing credit enhancement
is assessed. The following aspects are considered: structuring and sizing
of the transaction, own funds level of the structure, expected source
of repayment, price volatility of the underlying assets. This analysis is
applied to \"non-recourse\" loans granted by the Group.
The \"financial assets at amortised cost\" category includes, in particular,
loans granted by the Group, as well as reverse repurchase agreements
and securities held by the Group ALM Treasury in order to collect
contractual flows and meeting the cash flow criterion.
Measurement of expected credit losses
Expected credit losses are defined as an estimate of credit losses (i.e.
the present value of all cash shortfalls) weighted by the probability
of occurrence of these losses over the expected life of the financial
instruments. They are measured on an individual basis, for all exposures.
In practice, for exposures classified in stage 1 and stage 2, expected credit
losses are measured as the product of the probability of default (\"PD\"),
Loss Given Default (\"LGD\") and exposure at default (\"EAD\"), discounted at
the effective interest rate of the exposure (EIR). They result from the risk
of default within the next 12 months (stage 1), or from the risk of default
over the maturity of the facility (stage 2). In the consumer credit specialist
business, because of the specificity of credit exposures, the methodology
used is based on the probability of transition to term forfeiture, and
on discounted loss rates after term forfeiture. These parameters are
measured on a statistical basis for homogeneous populations.
For exposures classified in stage 3, expected credit losses are measured
as the value, discounted at the effective interest rate, of all cash shortfalls
over the life of the financial instrument. Cash shortfalls represent the
difference between the cash flows that are due in accordance with the
contract, and the cash flows that are expected to be received. Where
appropriate, the estimate of expected cash flows takes into account a
cash flow scenario arising from the sale of the defaulted loans or groups
of loans. Proceeds from the sale are recorded net of costs to sell.
The methodology developed is based on existing concepts and
methods (in particular the Basel framework) on exposures for which
capital requirement for credit risk is measured according to the IRBA
methodology. This method is also applied to portfolios for which capital
requirement for credit risk is measured according to the standardised
approach. Besides, the Basel framework has been adjusted in order to
be compliant with IFRS 9 requirements, in particular the use of forward-
All contractual terms of the financial instrument are taken into account,
including prepayment, extension and similar options. In the rare cases
where the expected life of the financial instrument cannot be estimated
reliably, the residual contractual term is used. The standard specifies
that the maximum period to consider when measuring expected credit
losses is the maximum contractual period. However, for revolving credit
cards and overdrafts, in accordance with the exception provided by IFRS 9
for these products, the maturity considered for measuring expected
credit losses is the period over which the entity is exposed to credit
risk, which may extend beyond the contractual maturity (notice period).
For revolving credits and overdrafts to non-retail counterparties, the
contractual maturity can be used, for example if the next review date is
the contractual maturity as they are individually managed.
Probabilities of Default (PD)
Probability of Default is an estimate of the likelihood of default over a
The determination of the PD is based on the Group's internal rating
system, which is described in chapter 5 of the Universal registration
document (section 5.4 Credit risk \u2013 Credit risk management policy). This
section describes how environmental, social and governance (ESG) risks
are taken into account in credit and rating policies, notably with the
introduction of a new tool: the ESG Assessment.
The measurement of expected credit losses requires the estimation of
both 1-year probabilities of default and lifetime probabilities of default.
1-year PDs are derived from long term average regulatory \"through the
cycle\" PDs to reflect the current situation (\"Point in Time\" or \"PIT\").
Lifetime PDs are determined based on the rating migration matrices
reflecting the expected changes in the rating of the exposure until
maturity, and the associated probabilities of default.
Loss Given Default is the difference between contractual cash flows
and expected cash flows, discounted using the effective interest rate
(or an approximation thereof) at the default date. LGD is expressed as a
percentage of the Exposure At Default (EAD).
The estimate of expected cash flows takes into account cash flows
resulting from the sale of collateral held or other credit enhancements
if they are part of the contractual terms and are not accounted for
separately by the entity (for example, a mortgage associated with a
residential loan), net of the costs of obtaining and selling the collateral.
For guaranteed loans, the guarantee is considered as integral to the
loan agreement if it is embedded in the contractual clauses of the
loan, or if it was granted concomitantly to the loan, and if the expected
reimbursement amount can be attached to a loan in particular (i.e.
absence of pooling effect by means of a tranching mechanism, or
the existence of a global cap for a whole portfolio). In such case, the
guarantee is taken into account when measuring the expected credit
losses. Otherwise, it is accounted for as a separate reimbursement asset.
The LGD used for IFRS 9 purposes is derived from the Basel LGD
parameters. It is adjusted for downturn and conservatism margins (in
particular regulatory margins), except for margins for model uncertainties.
Exposure At Default (EAD)
Exposure At Default (EAD) of an instrument is the anticipated outstanding
amount owed by the obligor at the time of default. It is determined by the
expected payment profile taking into account, depending on the product
type: the contractual repayment schedule, expected early repayments
and expected future drawings for revolving facilities.
Forward-looking information
The amount of expected credit losses is measured on the basis of
probability-weighted scenarios, in view of past events, current conditions
and reasonable and supportable economic forecasts.
The principles applied to take into account forward-looking information
when measuring expected credit losses are detailed in note 3.g Cost of
On initial recognition of portfolios of insurance contracts acquired as part
of a business combination or a separate transfer, groups of contracts
acquired are treated as if the contracts had been issued at the date
of the transaction. The consideration received or paid in exchange for
the contracts is treated as an approximation of the premiums received
for the purpose of calculating the contractual service margin at initial
recognition from this amount. In the case of a business combination
within the scope of IFRS 3, the consideration received or paid is the fair
value of the contracts at that date. For onerous contracts, the excess
of the fulfilment cash flows over the consideration paid or received is
recognised in the goodwill (or the profit resulting from an acquisition on
advantageous terms) if it is a business combination and in a separate
transfer, in the profit and loss account. For profitable contracts, the
difference is recorded as a contractual service margin. In addition, an
asset for cash flows related to acquisition costs must be recognised, for
its fair value, for the acquisition costs related to the renewal of existing
insurance contracts or for the acquisition costs already paid by the
acquired company for future contracts.
An insurance contract shall be derecognised when the obligation it covers
is extinguished, by payment or maturity, or if the terms of the contract
are amended in such a way that the accounting treatment of the contract
would have been substantially different if those amendments had
originally existed. The derecognition of a contract entails the adjustment
of the fulfilment cash flows, the contractual services margin and the
coverage units of the group in which it was included.
General measurement model (Building Block Approach \u2013 BBA)
The general model for the measurement of insurance contracts is the best
estimate of the future cash flows to be paid or received necessary to meet
contractual obligations. This estimate should reflect the different possible
scenarios and the effect of the options and guarantees included in the
contracts within the limit or \"contract boundary\". The determination of
this contract boundary requires an analysis of the rights and obligations
arising from the contract and, in particular, of the insurer's ability to
change its price to reflect the risks. This leads, for example, to the
exclusion of tacit renewals if the tariff can be amended or to the inclusion
Cash flows are discounted to reflect the time value of money. They
correspond only to cash flows attributable to insurance contracts either
directly or through allocation methods: premiums, acquisition and
contract management costs, claims and benefits, indirect costs, taxes
and depreciation of tangible and intangible assets.
The cash flows estimate is supplemented by an explicit risk adjustment
to cover the uncertainty for non-financial risk. These two elements
constitute the fulfilment cash flows of the contracts. A contractual service
margin is added representing the expected gain or loss on future services
related to a group of contracts.
If the contractual service margin is positive, it is shown on the balance
sheet within the insurance contract's measurement and amortised as
the services are rendered; if negative, it is recognised immediately in the
income statement. The original loss (or \"loss component\") is monitored
extra-accounting to allow for the subsequent recognition of the insurance
Acquisition costs are deducted from the contractual service margin of
the group of contracts to which they relate.
At each reporting date, the carrying amount of a group of insurance
contracts is the sum of the liabilities for the remaining coverage which
include the fulfilment cash flows related to future services (best estimate
and risk adjustment) and the contractual service margin remaining at
that date, and of the liabilities for incurred claims which include the
best estimate of the cash flows and the risk adjustment, without any
contractual service margin. The assumptions used to estimate future cash
flows and the non-financial risks adjustment are updated, as well as the
discount rate, to reflect the situation at the reporting date.
The contractual service margin is adjusted for changes in the estimates
of non-financial assumptions related to future services, capitalised at
inception rate, and then amortised in the income statement for services
rendered over the period in the insurance service revenue. In the case of
contracts which become onerous, after consumption of the contractual
service margin, the loss is recognised in the reporting period. In the
case of onerous contracts that become profitable again as a result of
favourable changes in assumptions, the contractual service margin is
only reconstitued after offsetting the loss component
The release of expected fulfillment flows (cash flow estimates and risk
adjustments) for the period, except for the amount allocated to the
loss component, is recorded in insurance service revenue. The change
in estimates related to past service is recognised in insurance service
The Group includes the change in the adjustment for non-financial risk
in its entirety in the insurance service result.
The Group records in equity the effect of the change in the discount rate.
The expense of unwinding the discount is recorded in \"insurance financial
income or expenses\" based on the initial rate (the inception rate for
the liability for remaining coverage, and the rate at claims occurrence
date for the liability for incurred claims). The difference between the
value of liabilities discounted at the rate fixed at initial date and the
value of those same liabilities estimated using current discount rate
is recognised in equity. The effect on liabilities of changes in financial
variables, in particular the indexation of benefits under the contract, is
also recognised in equity.
Creditor protection insurance (CPI), personal protection insurance and
other non-life risks are measured either according to the general model
or, if the conditions are met, using the simplified approach. The same
treatment applies to reinsurance contracts assumed or held.
The discount rate is based on the risk-free rate adjusted for the illiquidity
The risk adjustment is determined using the quantile method.
The coverage unit used to amortise the contractual service margin is
derived from the risk premium earned during the period.
Measurement model for contracts with direct participation
features (Variable Fee Approach \u2013 VFA)
Direct participating contracts are insurance or investment contracts for
\u25a0 the contractual terms specify that the policyholder is entitled to a
share of a clearly defined portfolio of underlying assets;
\u25a0 the insurer expects to pay the policyholder a sum corresponding to
a substantial portion of the return on the fair value of the underlying
\u25a0 the insurer expects that any change in the amounts to be paid to the
policyholder is, in a substantial proportion, attributable to the change
in the fair value of the underlying assets.
Compliance with these conditions is monitored on the underwriting date
and is not reviewed later.
For these contracts, for which the insurer has to pay the policyholder an
amount corresponding to the fair value of clearly identified underlying
assets, less a variable compensation, a specific model (called the
\"Variable Fee Approach\") has been developed by adapting the general
At each reporting date, liabilities related to these contracts are adjusted
for the return earned and changes in the fair value of the underlying
assets: the policyholders' share is recorded in the contract fulfilment cash
flows against insurance financial income or expense and the insurer's
share corresponding to the variable fee is included in the contractual
The contractual service margin is also adjusted for the effect of changes
in cash flows that do not vary according to the returns on the underlying
assets and that relate to future services: estimation of cash flows, risk
adjustment, changes in the time value effect of money and changes in the
financial risks that do not result from the underlying assets (for example,
the effect of financial guarantees).
Changes in the fulfillment cash flows that do not change in connection
with the yields of underlying assets and that relate to past service events
are recognised in the profit and loss account.
Due to the mechanism for allocating the change in the value of the
underlying assets between the policyholders and the insurer, the result
of these contracts is in principle mainly represented by the release
of the fulfilment cash flows and the amortisation of the contractual
service margin. When the underlying assets fully support the liabilities
and are measured at fair value through profit or loss, the financial result
under these contracts should be nil. The Group has chosen the option of
reclassifying in shareholders' equity the change in the liabilities related
to the underlying assets that are not measured at fair value through
Life and savings contracts meeting the above definition of direct
participating contracts are valued using the variable fee approach. When
these contracts include a surrender value, it meets the definition of a
non-distinct investment component and changes in that investment
component (including related payments) are therefore not recognised
The Group has chosen to apply the option introduced by the European
regulation not to divide the portfolios of participating contracts based
on intergenerational mutualisation by annual cohort. This option
is applied to insurance contracts and investment contracts with
discretionary participation that are eligible to the variable fee approach,
euro mono-supports or multi-supports including a euro fund, for which
the policyholders' profit-sharing is mutualised between the different
generations of policyholders in France, Italy and Luxembourg. As a result
of this choice, the assessment of the onerousness is made on the basis
of the portfolio and not on the basis of the annual cohorts.
The contract boundary includes future payments as long as the applicable
pricing is not modifiable (e.g. acquisition or management loadings),
as well as the annuity phase in service when contracts provide for a
The discount rate is based on the risk-free rate, extrapolated over the
duration exceeding the period for which observable data are available
and adjusted by a liquidity premium on the basis of the underlying assets
to reflect the illiquidity of the liabilities.
The risk adjustment is determined using the cost of capital method
including future payments without considering the risk of mass lapses.
The coverage unit used to amortise the contractual service margin is the
change in savings due to policyholders (determined at present value),
adjusted to take into account the impact of the real return on financial
or property assets compared to the actuarial neutral risk projection.
Simplified measurement model
(Premium Allocation Approach \u2013 PAA)
Short-term contracts (less than one year) may be measured using a
simplified approach known as the premium allocation approach, also
applicable to longer-term contracts if it leads to results similar to those
of the general model in terms of liability for the remaining coverage. For
profitable contracts, the liability for the remaining coverage is measured
based on the deferral of premiums collected according to a logic similar
to that used under IFRS 4. Onerous contracts and liabilities for incurred
claims are valued according to the general model. Liabilities for incurred
claims are discounted if the expected settlement of claims takes place
one year after the date of occurrence. In this case, the option of classifying
the effect of changes in the discount rate in equity is also applicable.
The Group has chosen the option of deferring acquisition costs over the
coverage duration and therefore presenting them as a deduction of the
Liabilities for incurred claims are discounted if the expected settlement
of claims takes place after one year from the date of occurrence. The
discount expense is recognised in insurance financial income or expenses
as in the general model. In this case, the option to classify the effect of
changes in the discount rate into equity is also applicable. The Group has
retained this option for the liabilities for incurred claims.
At each reporting date, the adjustment of liabilities for remaining coverage
and for incurred claims is recognised in profit or loss.
Creditor insurance (ADE), personal protection insurance and other non-
life insurance contracts, and reinsurance contracts assumed or held,
are measured using the simplified approach if the conditions are met.
Treatment of the reinsurance
The reinsurance ceded is also treated according to the general or
simplified model, but the equivalent of the contractual service margin
represents the expected gain or loss on the reinsurance and may be
positive or negative. If a reinsurance contract immediately offsets the
losses of an underlying group of onerous contracts, the reinsurance gain is
recognised immediately in profit or loss. This \"loss recovery component\"
is used to record amounts that are subsequently presented in net income.
In addition, contract execution flows include the reinsurer's risk of non-
Reinsurance contracts held are measured by the Group using the
simplified approach or the general model.
Information on the nature and extent of risks relating to financial
instruments as required by IFRS 7 \"Financial Instruments: Disclosures\"
and to insurance contracts as required by IFRS 17 \"Insurance
Contracts\", along with information on regulatory capital required by
IAS 1 \"Presentation of financial statements\" are presented in chapter 5
of the Universal registration document. This information, which is an
integral part of the notes to the consolidated financial statements of
the BNP Paribas Group at 31 December 2023, is covered by the opinion
of the Statutory Auditors on the financial statements, and is identified in
the management report by the word \"Audited\". Section 4 of chapter 5,
paragraph Exposures, provisions and cost of risk provides, in particular,
IFRS 7 information on credit risk exposures and related impairment
broken down according to whether the underlying loans are performing
or non-performing, by geographic area and by industry.
\u25a0 Since 1 January 2023, BNP Paribas Group's insurance entities have
applied IFRS 17 \"Insurance Contracts\" published in May 2017,
amended in June 2020 and adopted by the European Union in
November 2021, including the exemption provided for in article 2 of
regulation 2021/2036 regarding annual cohorts. The transition date
for IFRS 17 is 1 January 2022 for the purposes of the opening balance
sheet of the comparative period required by the standard.
As the Group deferred the application of IFRS 9 \"Financial Instruments\"
for its insurance entities until the entry into force of IFRS 17, they
therefore apply this standard from 1 January 2023.
In addition, the entry into force of IFRS 17 brings into effect various
amendments to other standards, including IAS 1 for presentation,
IAS 16 and IAS 40 for the valuation and presentation of real estate
assets, IAS 28 for exemptions from the equity method and IAS 32 and
IFRS 9 for own equity instruments and other securities issued by the
Finally, the amendment to IFRS 17 \"Initial application of IFRS 17
and IFRS 9 \u2013 Comparative information\" published by the IASB in
December 2021 and adopted by the European Union on 9 September
2022 allows insurance companies applying IFRS 9 and IFRS 17 for
the first time simultaneously to present 2022 comparative data as if
IFRS 9 was already applied, using an \"overlay\" approach. The Group
applied this optional approach for all financial instruments, including
those derecognised in 2022, for both classification and measurement
Transition from IFRS 4 to IFRS 17
IFRS 17 applies retroactively to all contracts outstanding at the
transition date, i.e. 1 January 2022 due to the mandatory comparative
period. Three transition methods may be used: a full retrospective
approach and, if this cannot be implemented, a modified retrospective
approach or an approach based on the fair value of the contracts at
The majority of entities controlled by the Group have applied the
modified retrospective approach and, to a lesser extent, for some
portfolios, an approach based on the fair value of contracts at the
As a matter of fact, not all the necessary information was available or
was not sufficiently granular, in particular due to systems migration
and data retention requirements, to apply a full retrospective
approach. Moreover, the full retrospective approach would have
required reconstituting management's assumptions and intentions
The objective of the modified retrospective approach is to achieve a
result that is as close as possible to the result that would have been
obtained through the retrospective application of the standard, based
on reasonable and supportable information available without undue
Thus, the entities concerned applied the modified retrospective
approach to most portfolios of existing contracts, whether in Protection
or Life/Savings, according to the principles below.
For Protection contracts valued according to the general model,
the principle of the modified retrospective approach consists in
reconstituting liabilities at the initial recognition date based on
their valuation at the transition date, by retroactively reconstituting
movements between the two dates with simplifications:
cash flows at inception are estimated by adding the actual cash
flows recorded between the two dates, to the amount at the
the original discount rate can be determined with interest rate
curves simulating those at the date of first recognition;
(1) The full set of standards adopted for use in the European Union can be found on the website of the European Commission at:
Amendments to other standards related
The Group also applied the changes in IAS 40 and IAS 16 resulting from
IFRS 17, leading to the measurement of property held as underlying
assets of direct participating contracts at fair value through profit or
loss. It also applied the amendments to IAS 32 and IFRS 9, making it
possible to maintain on the balance sheet financial assets issued by the
Group that are held as assets underlying direct participating contracts
and are measured at fair value through profit or loss.
Business combinations (including goodwill) prior to the transition date
were not modified except for the cancellation of specific intangible
\u25a0 In relation to the IBOR and Eonia rates reform, at the end of 2018 the
Group launched a global transition programme, involving all business
lines and functions. The aim of the programme was to manage and
implement the transition from the old benchmark interest rates
to the new ones in major jurisdictions and currencies (euro, pound
sterling, US dollar, Swiss franc and Japanese yen), while reducing the
risks associated with this transition and meeting the deadlines set
by the competent authorities. The Group contributed to market-wide
workshops with central banks and financial regulators.
In Europe, the Eonia-\u20acSTR transition, which was purely technical given
the fixed link between these two indices, was finalised at the end of
December 2021 while the maintenance of Euribor on a sine die basis
Publication of JPY synthetic Libor was discontinued at the end of 2022.
Regarding synthetic GBP Libor, the publication of the 1-month and
6-month settings ceased in March 2023, thereby only leaving the
3-month setting, which will subsist until March 2024.
In the United States, the decision was taken to continue publishing
the USD Libor until mid-2023, and a legislative solution was passed at
the federal level in the first quarter of 2022 to address legacy US-law
governed contracts. In early April 2023, the FCA (Financial Conduct
Authority) announced its decision to compel ICE BA (as benchmark
administrator) to continue publication of 1-month, 3-month and
6-month USD Libor after 30 June 2023 and until 30 September 2024,
using a synthetic methodology.
Through the implementation and execution of a detailed transition
plan, the Group finalised its migration to the new reference rates.
In September 2019, the IASB published \"Phase 1\" amendments to
IAS 39 and IFRS 7, amending the hedge accounting requirements so
that hedges affected by the benchmark interest rate reform could
continue despite the uncertainty during the transition of the hedged
items or hedging instruments to the reformed benchmark rates. These
amendments, endorsed by the European Commission on 15 January
2020, have been applied by the Group since 31 December 2019.
In August 2020, the IASB published \"Phase 2\" amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16 introducing several changes
applicable during the effective transition to the new benchmark interest
rates. These amendments allow for changes in the contractual cash
flows of financial instruments resulting from the IBOR rates reform to
be treated as a simple reset of their variable interest rate, provided,
however, that such changes are made on an economically equivalent
basis. They also allow the continuation of hedging relationships,
subject to amendments to their documentation to reflect changes
in hedged instruments, hedging instruments, hedged risk, and/or the
method for measuring effectiveness during the transition to the new
These amendments, adopted by the European Commission in
December 2020, have been applied by the Group since 31 December
2020 to maintain its existing hedging relationships which have been
modified as a result of the transition to the new RFRs.
\u25a0 Further to the Pillar II recommendations of the Organisation for
Economic Cooperation and Development (OECD) in relation to the
international tax reform, the European Union adopted on 14 December
2022 the 2022/2523 directive instituting a minimum corporate income
tax for international groups, effective 1 January 2024.
To clarify the directive's potential impacts, the IASB issued on 23 May
2023 a series of amendments to IAS 12 \"Income Taxes\", which were
adopted by the European Union on 8 November 2023. In accordance
with the provisions of these amendments, the Group applies the
mandatory and temporary exception not to recognise deferred taxes
associated with this additional taxation.
Based on the available information, the impact of the Pillar II reform
are expected to be non-material for the Group once adopted. Income
before tax and corporate income tax by country are presented in
chapter 8 of the Universal registration document (part 8.6, section II.
Profit and Loss account items and headcount by country).
\u25a0 In France, changes resulting from the pension reform enacted on
14 April 2023 constitute a change in post-employment benefits, based
on IAS 19 \u00a7 104. The non-material impact of this change was recorded
in the profit and loss account for the period.
The introduction of other standards, amendments and interpretations that
are mandatory as from 1 January 2023, in particular the amendments to
IAS 1 \"Presentation of financial statements\", IAS 8 \"Changes in accounting
estimates and errors\" and \"IAS 12 Income Tax\", had no effect on the
Group's financial statements at 31 December 2023.
The Group did not early adopt any of the new standards, amendments,
and interpretations adopted by the European Union, when the application
Since the revised IFRS 3 has been applied prospectively, business
combinations completed prior to 1 January 2010 were not restated for
the effects of changes to IFRS 3.
As permitted under IFRS 1, business combinations that took place before
1 January 2004 and were recorded in accordance with the previously
applicable accounting standards (French GAAP), had not been restated
in accordance with the principles of IFRS 3.
Specificities relating to insurance contracts acquired through business
combinations are set out in note 1.g.2 in the paragraph Recognition and
The BNP Paribas Group tests goodwill for impairment on a regular basis.
The BNP Paribas Group has split all its activities into cash-generating
units(1) representing major business lines. This split is consistent with the
Group's organisational structure and management methods, and reflects
the independence of each unit in terms of results and management
approach. It is reviewed on a regular basis in order to take account of
events likely to affect the composition of cash-generating units, such as
acquisitions, disposals and major reorganisations.
Testing cash-generating units for impairment
Goodwill allocated to cash-generating units is tested for impairment
annually and whenever there is an indication that a unit may be
impaired, by comparing the carrying amount of the unit with its
recoverable amount. If the recoverable amount is less than the carrying
amount, an irreversible impairment loss is recognised, and the goodwill
is written down by the excess of the carrying amount of the unit over
Recoverable amount of a cash-generating unit
The recoverable amount of a cash-generating unit is the higher of the
fair value of the unit less costs to sell, and its value in use.
Fair value is the price that would be obtained from selling the unit at the
market conditions prevailing at the date of measurement, as determined
mainly by reference to actual prices of recent transactions involving
similar entities or on the basis of stock market multiples for comparable
Value in use is based on an estimate of the future cash flows to be
generated by the cash-generating unit, derived from the annual forecasts
prepared by the unit's management and approved by Group Executive
Management, and from analyses of changes in the relative positioning
of the unit's activities on their market. These cash flows are discounted
at a rate that reflects the return that investors would require from an
investment in the business sector and region involved.
Funds: the Group structures and manages funds to offer investment
opportunities to its customers. Dedicated or public funds are offered
to institutional and individual customers and are distributed and
commercially monitored by the BNP Paribas Group. The entities of the
BNP Paribas Group responsible for managing these funds may receive
management fees and performance commission. The BNP Paribas Group
may hold units in these funds, as well as units in funds dedicated to the
insurance activity not managed by the BNP Paribas Group.
Asset financing: the BNP Paribas Group establishes and finances
structured entities that acquire assets (aircraft, ships, etc.) intended for
lease, and the lease payments received by the structured entity are used
to repay the financing, which is guaranteed by the asset held by the
Other: on behalf of its customers, the Group may also structure entities
which invest in assets or are involved in debt restructuring.
An interest in an unconsolidated structured entity is a contractual or
non-contractual link that exposes the BNP Paribas Group to variable
returns from the performance of the entity.
The Group's assets and liabilities related to the interests held in sponsored structured entities are as follows:
In millions of euros, at 31 December 2023
INTERESTS ON THE GROUP BALANCE SHEET
Financial instruments at fair value through profit or loss
Derivatives used for hedging purposes
Financial instruments at fair value through equity
Financial assets at amortised cost
Financial investments and other assets related to
Financial instruments at fair value through profit or loss
Derivatives used for hedging purposes
Financial liabilities at amortised cost
SIZE OF STRUCTURED ENTITIES(1)
In millions of euros, at 31 December 2022
restated according to IFRS 17 and 9
INTERESTS ON THE GROUP BALANCE SHEET
Financial instruments at fair value through profit or loss
Derivatives used for hedging purposes
Financial instruments at fair value through equity
Financial assets at amortised cost
Financial investments and other assets related to
Financial instruments at fair value through profit or loss
Derivatives used for hedging purposes
Financial liabilities at amortised cost
SIZE OF STRUCTURED ENTITIES(1)
(1) Thesize of sponsored structured entities equals the total assets of the structured entity for securitisation vehicles, the net asset value for funds
(excluding management mandates) and the structured entity's total assets or the amount of the BNP Paribas Group's commitment for asset financing
The BNP Paribas Group's maximum exposure to losses on sponsored
structured entities is the carrying amount of the assets, excluding, for
financial assets at fair value through equity, changes in value taken
directly to equity, as well as the nominal amount of the financing
commitments and guarantee commitments given and the notional
amount of credit default swaps (CDS) sold.
Information relative to interests in non-
sponsored structured entities
The main interests held by the BNP Paribas Group when it acts solely
as an investor in non-sponsored structured entities are detailed below:
\u25a0 units in funds that are not managed by the Group, which are held by
the Insurance business line: as part of the asset allocation strategy
corresponding to investments related to the premiums for unit-
linked contracts or for the general fund, the Insurance business line
subscribes to units of structured entities. These short- or medium-term
investments are held for their financial performance and meet the
risk diversification criteria inherent to the business. They amounted
to EUR 26 billion at 31 December 2023 (EUR 27 billion at 31 December
2022). Changes in value and the majority of the risks associated with
these investments are borne by policyholders in the case of assets
representative of unit-linked contracts, and by the insurer in the case
of assets representative of the general fund;
\u25a0 other investments in funds not managed by the Group: as part of its
trading business, the BNP Paribas Group invests in structured entities
without any involvement in either managing or structuring these
entities (investments in mutual funds, securities funds or alternative
funds), particularly as economic hedge for structured products sold to
customers. The Group also invests in minority holdings in investment
funds, in support of companies, as part of its venture capital business.
These investments amounted to EUR 12 billion at 31 December 2023
(8 billion at 31 December 2022);
\u25a0 investments in securitisation vehicles: the breakdown of the Group's
exposure and the nature of the securities held are presented in
chapter 5 of the Universal registration document in the section
Securitisation as investor.
Besides, in the framework of its asset financing activity, the BNP Paribas
Group provides financing to structured entities that are established by
and for its clients and whose purpose is to acquire assets (aircraft, ships,
etc.) intended for lease to those same clients. These financings amount to
EUR 6 billion at 31 December 2023 (EUR 4 billion at 31 December 2022).
restated according to IFRS 17 and 9
SNC Taitbout Participation 3
Soci\u00e9t\u00e9 Orbaisienne de
BNPP VPG Brookline Cre LLC(s)
Aquarius + Investments PLC(t)
BNPP Ireland Unlimited Co
BNPP Vartry Reinsurance DAC
BNPP Securities Japan Ltd
Expo Indico EIII Investimentos
BNPP Securities Korea Co Ltd
Banque de Wallis et Futuna
Matchpoint Finance PLC(t)
Ribera Del Loira Arbitrage
Single Platform Investment
BNPP Capital Services Inc
BNPP Colombia Corporacion
BNPP Financial Services LLC
BNPP IT Solutions Canada Inc
BNPP Mexico SA Institucion
restated according to IFRS 17 and 9
BNPP Proprietario Fundo de
Investimento Multimercado(s)
BNPP US Wholesale Holdings
Dale Bakken Partners 2012 LLC
BNPP Arbitrage Hong Kong Ltd
BNPP Finance Hong Kong Ltd
BNPP India Holding Private Ltd
BNPP Securities Taiwan Co Ltd
BNPP Sekuritas Indonesia Pt
COMMERCIAL, PERSONAL BANKING & SERVICES
COMMERCIAL & PERSONAL BANKING IN THE EUROZONE
Commercial & Personal Banking in France
2SF - Soci\u00e9t\u00e9 des Services
BNPP D\u00e9veloppement Oblig
BNPP Factor (Portugal branch)
BNPP Factor (Spain branch)
BNPP Nouvelle Cal\u00e9donie
Soci\u00e9t\u00e9 Lairoise de
restated according to IFRS 17 and 9
International Factors Italia SPA
Sviluppo HQ Tiburtina SRL
Tierre Securitisation SRL(t)
Worldline Merchant Services
Commercial & Personal Banking in Belgium
Bancontact Paytoniq Company
BNPP Group Service Center SAPoland
Banking Funding Company SA
BNPP Solutions Spolka ZOO
BNPP Commercial Finance Ltd
BNPP Fortis (Spain branch)
BNPP Fortis (United States
Cr\u00e9dit pour Habitations
Immobili\u00e8re Sauveniere SA
Private Equity Investments (a)
Commercial & Personal Banking in Luxembourg
BGL BNPP (Germany branch)
Compagnie Financi\u00e8re
COMMERCIAL & PERSONAL BANKING OUTSIDE THE EUROZONE
restated according to IFRS 17 and 9
Banque Internationale pour le
Commerce et l'Industrie de la
Banque Internationale pour
le Commerce et l'Industrie
BNPP Faktoring Spolka ZOO
BNPP Yatirimlar Holding AS
BancWest Holding Inc Grantor
Bank of the West Auto Trust
Bank of the West Auto Trust
Bank of the West Auto Trust
BOW Auto Receivables LLC(t)
BWC Opportunity Fund 2 Inc(t)
BWC Opportunity Fund Inc(t)
CFB Community Development
Claas Financial Services LLC
Commercial Federal Affordable
First Santa Clara Corp(s)
United California Bank Deferred
Compensation Plan Trust(s)
restated according to IFRS 17 and 9
Autonoria Spain 2021 FT(t)
Autonoria Spain 2022 FT(t)
Autonoria Spain 2023 FT(t)
BGN Mercantil E Servicos Ltda
BNPP Personal Finance (Czech
BNPP Personal Finance South
BON BNPP Consumer Finance
Central Europe Technologies
Cetelem Business Consulting
Cetelem Servicios SA de CV
Creation Financial Services Ltd
Cr\u00e9dit Moderne Antilles
Cr\u00e9dit Moderne Oc\u00e9an Indien
GCC Consumo Establecimiento
Genius Auto Finance Co Ltd
International Development
restated according to IFRS 17 and 9
Personal Finance Location
Securitisation funds Genius
Securitisation funds UCI and
Securitisation funds Wisdom
Servicios Financieros Carrefour
Stellantis Bank SA (Ex- Opel
Stellantis Bank SA (Austria
branch) (Ex- Opel Bank (Austria
Stellantis Bank SA (Germany
Stellantis Bank SA (Italy
branch) (Ex- Opel Bank (Italy
Stellantis Bank SA (Spain
branch) (Ex- Opel Bank (Spain
Stellantis Financial Services
Vauxhall Finance Ltd (Ex-
Arval Hellas Car Rental SA
Arval Service Lease Aluger
Operational Automoveis SA
Arval Service Lease Italia SPA
Arval Service Lease Polska
Arval Service Lease Romania
restated according to IFRS 17 and 9
Arval UK Leasing Services Ltd
Public Location Longue Dur\u00e9e
Rentaequipos Leasing Peru SA
TEB Arval Arac Filo Kiralama AS
Terberg Leasing Justlease
BNPP 3 Step IT (Italy branch)
BNPP 3 Step IT (Netherlands
BNPP 3 Step IT (Spain branch)
BNPP 3 Step IT (United Kingdom
BNPP Finansal Kiralama AS
BNPP Lease Group (Germany
BNPP Lease Group (Portugal
BNPP Leasing Solutions AB
BNPP Leasing Solutions AS
Electroniques (Spain branch)
BNPP Leasing Solutions GmbH
(Ex- All In One Vermietung)
BNPP Leasing Solutions IFN SARomania
BNPP Leasing Solutions Ltd
BNPP Leasing Solutions NV
BNPP Rental Solutions Ltd
BNPP Rental Solutions SPA
Claas Financial Services (Italy
restated according to IFRS 17 and 9
Claas Financial Services (Spain
Claas Financial Services Ltd
CNH Industrial Capital Europe
CNH Industrial Capital Europe
CNH Industrial Capital Europe
CNH Industrial Capital Europe
CNH Industrial Capital Europe
CNH Industrial Capital Europe
Folea Grundstucksverwaltungs
Heffiq Heftruck Verhuur BV
JCB Finance (Germany branch)
JCB Finance (Italy branch)
Financi\u00e8re des Paiements
Financi\u00e8re des Paiements
Financi\u00e8re des Paiements
Financi\u00e8re des Paiements
Financi\u00e8re des Paiements
Espresso Financial Services
Geojit Technologies Private Ltd
INVESTMENT & PROTECTION SERVICES
restated according to IFRS 17 and 9
Batipart Participations SAS
BNPP Actions Croissance(s)
BNPP Best Selection Actions
BNPP Cardif General Insurance
BNPP Cardif Hayat Sigorta AS
BNPP Cardif Livforsakring AB
BNPP Cardif Livforsakring AB
BNPP Cardif Livforsakring AB
BNPP Cardif Pojistovna AS
BNPP Cardif TCB Life Insurance
BNPP Cardif Vita Compagnia
BNPP CP Cardif Alternative(s)
BNPP CP Cardif Private Debt(s)
BNPP France Cr\u00e9dit(s)
BNPP Global Senior Corporate
BNPP Moderate Focus Italia(s)
BNPP Mon\u00e9taire Assurance(s)
BNPP Multistrat\u00e9gies
BNPP S\u00e9lection Dynamique
BNPP S\u00e9lection Flexible(s)
BNPP Smallcap Euroland(s)
BOB Cardif Life Insurance
Camgestion Obliflexible(s)
Cardif Alternatives Part I(s)
Cardif Assurance Vie (Austria
Cardif Assurance Vie (Belgium
Cardif Assurance Vie (Bulgaria
restated according to IFRS 17 and 9
Cardif Assurance Vie (Germany
Cardif Assurance Vie (Italy
Cardif Assurance Vie (Portugal
Cardif Assurance Vie (Romania
Cardif Assurance Vie (Spain
Cardif Assurance Vie (Taiwan
Cardif Assurances Risques
Cardif Assurances Risques
Cardif Assurances Risques
Cardif Assurances Risques
Cardif Assurances Risques
Cardif Assurances Risques
Cardif Assurances Risques
Divers (Netherlands branch)
Cardif Assurances Risques
Cardif Assurances Risques
Cardif Assurances Risques
Cardif Assurances Risques
Cardif Assurances Risques
Divers (Switzerland branch)
Cardif Assurances Risques
Cardif Biztosito Magyarorszag
Cardif BNPP AM Euro Paris
Cardif BNPP AM Global Senior
Cardif BNPP AM Sustainable
Euro Equity (Ex- Natio Fonds
Cardif BNPP AM Sustainable
Europe Equity (Ex- Natio Fonds
Cardif BNPP IP Convertibles
Cardif BNPP IP Signatures(s)
Cardif CPR Global Return(s)
Cardif do Brasil Seguros e
Cardif Edrim Signatures(s)
Cardif Forsakring AB (Denmark
restated according to IFRS 17 and 9
Cardif Forsakring AB (Norway
Cardif Insurance Holdings PLC
(Ex- Cardif Pinnacle Insurance
Cardif Life Insurance Co Ltd
Cardif Life Insurance Japan
Cardif Non Life Insurance
Cardif Pinnacle Insurance
Cardif Polska Towarzystwo
Cardif Support Unipessoal Lda
Cardif Vita Convex Fund Eur(s)
Centre Commercial Francilia
CFH Alexanderplatz Hotel SARLLuxembourg
CFH Bercy Interm\u00e9diaire
Diversipierre Germany GmbH
Fonci\u00e8re Partenaires(s)
Immobiliers pour le Commerce
FP Cardif Convex Fund USD(s)
restated according to IFRS 17 and 9
Natio Fonds Amp\u00e8re 1(s)
New Alpha Cardif Incubator
OC Health Real Estate GmbH
Paris Management Consultant
Permal Cardif Co Investment
Poistovna Cardif Slovakia AS
Schroder European Operating
SCI D\u00e9fense Vend\u00f4me
SCI Paris Cours de Vincennes
SCI Paris Grande Arm\u00e9e
SCI Saint Denis Mitterrand
SCI Vend\u00f4me Ath\u00e8nes
SCI Villeurbanne Stalingrad
Seniorenzentren Deutschland
Seniorenzentrum Heilbronn
Wolfratshausen Objekt GmbH
Services Epargne Entreprise
restated according to IFRS 17 and 9
Soci\u00e9t\u00e9 Francaise
Soci\u00e9t\u00e9 Immobili\u00e8re du Royal
Theam Quant Europe Climate
Gambit Financial Solutions
Tikehau Cardif Loan Europe(s)
Kapitalforvaltning AS (Sweden
Bancoestado Administradora
Baroda BNPP AMC Private Ltd
BNPP Agility Fund Private
France (Netherlands branch)
BNPP Asset Management USA
BNPP B Institutional II(s)
restated according to IFRS 17 and 9
Fundquest Advisor (United
Haitong Fortis Private Equity
HFT Investment Management
SME Alternative Financing
Auguste Thouard Expertise
BNPP Immobilier Promotion
BNPP Immobilier Promotion
BNPP Immobilier R\u00e9sidences
BNPP Immobilier R\u00e9sidentiel
BNPP Real Estate (United Arab
BNPP Real Estate Advisory
BNPP Real Estate Advisory &
Property Management UK Ltd
BNPP Real Estate Advisory
BNPP Real Estate Advisory
BNPP Real Estate Advisory
BNPP Real Estate Belgium SA
(Ex- BNPP Real Estate Holding
BNPP Real Estate Facilities
BNPP Real Estate Financial
BNPP Real Estate Investment
BNPP Real Estate Investment
BNPP Real Estate Investment
BNPP Real Estate Investment
BNPP Real Estate Investment
BNPP Real Estate Investment
Lisbon Representative Office
BNPP Real Estate Investment
BNPP Real Estate Investment
BNPP Real Estate Investment
restated according to IFRS 17 and 9
BNPP Real Estate Investment
BNPP Real Estate Investment
BNPP Real Estate Investment
BNPP Real Estate Italy SRL
BNPP Real Estate Portugal
BNPP Real Estate Property
BNPP Real Estate Property
BNPP Real Estate Property
BNPP Real Estate Property
BNPP Real Estate Property
BNPP Real Estate Singapore
BNPP Real Estate Spain SA
BNPP Real Estate Transaction
BNPP Real Estate Valuation
Construction-Sale Companies
Exeo Aura & Echo Offices Lda
restated according to IFRS 17 and 9
Property Companies (Property Used In Operations) and Others
BNPP Partners for Innovation
BNPP Partners for Innovation
BNPP Partners for Innovation
Euro Secured notes Issuer(s)
GIE Groupement Auxiliaire
GIE Groupement d'Etudes et
(a) At31 December 2023, 14 Private Equity investment entities versus 14 Private Equity investment entities at
(b) At31 December 2023, the securitisation funds UCI and RMBS Prado include 13 funds (FCC UCI 11, 12, 14 to 17,
RMBS Prado VII to XI, Green Belem I and RMBS Belem No 2) versus 14 funds (FCC UCI 11, 12, 14 to 17, RMBS Prado
V to X, Green Belem I and RMBS Belem No 2) at 31 December 2022.
(c) At31 December 2023, 117 Construction-sale companies (82 Full and 35 Equity) versus 125 Construction-sale
companies (91 Full and 34 Equity) at 31 December 2022.
(d) At31 December 2023, the securitisation funds Genius include 11 funds (Generation 2021-4 Retail Auto Mortgage
Loan Securitisation, Generation 2022-1 to 5 Retail Auto Mortgage Loan Securitisation, Generation 2023-1 to 5
Retail Auto Mortgage Loan Securitisation).
(e) At31 December 2023, the securitisation funds Wisdom include 13 funds (Wisdom Puhua Leasing 2021-2 & 3
Asset-Backed Securities, Wisdom Puhua Leasing 2022-1 Asset-Backed notes, Wisdom Puhua Leasing 2022-1
to 3 Asset-Backed Securities, Wisdom Puhua Leasing 2023-1 & 2 Asset-Backed notes, Wisdom Puhua Leasing
2023-1 & 2 Asset-Backed securities, Wisdom Puhua Leasing Zhixing 2023-1 & 2 Asset-Backed notes, Wisdom
Puhua Leasing Xinghe 2023-1 Asset-Backed Securities).
As requested by the ANC 2016 regulation, the list of entities that are controlled by the Group, jointly controlled or under significant influence, but
excluded from the scope of consolidation since their contribution to the consolidated financial statements would be immaterial to the Group, and the
Changes in the scope of consolidation
New entries (E) in the scope of consolidation
Passing qualifying thresholds
E3 Purchase,gain of control or significant influence
Removals (S) from the scope of consolidation
S1 Cessationof activity (dissolution, liquidation, etc.)
S2 Disposal,loss of control or loss of significant influence
S3 Passingqualifying thresholds
S4 Merger,Universal transfer of assets and liabilities
Variance (V) in voting or ownership interest
D1 Consolidationmethod change not related to fluctuation in voting or ownership interest
D2 Entitiesof a business held for sale
D3 Followingthe additional purchase of interest by BNP Paribas Group in 2022, Compagnie pour le Financement
des Loisirs was fully consolidated.
D4 Followingthe partial disposal by the Group in 2022, Worldline Merchant Services Italia SPA was consolidated
D5 Followingthe additional purchase of interest by BNP Paribas Group in 2022, bpost bank was fully consolidated.
D6 Followingthe partial disposal by the Group in 2022, Baroda BNPP AMC Private Ltd was consolidated under the
D7 Followingthe additional acquisition carried out by the Group, Arval Relsa and its subsidiaries are now
D8 Followingthe additional acquisition carried out by the Group, Kantox Holding and its subsidiaries are now
D9 Followingthe additional purchase of interest by the Group on 16 October 2023, Luizaseg Seguros SA is now fully
Equity* Controlledbut non-material entities consolidated under the equity method as associates
FV Jointcontrol or investment in associates measured at fair value through profit or loss
Prudential scope of consolidation
(1) Frenchsubsidiaries for which supervision of prudential requirements is complied with through the supervision
on a consolidated basis of BNP Paribas SA, in accordance with article 7.1 of Regulation n\u00b0575/2013 of the
European Parliament and of the Council.
(2) Entitiesconsolidated under the equity method in the prudential scope.
(3) Jointlycontrolled entities under proportional consolidation in the prudential scope.
(4) Collectiveinvestment undertaking excluded from the prudential scope.
restated according to IFRS 17 and 9
BNPP SA (Argentina branch)
BNPP SA (Australia branch)
BNPP SA (Bulgaria branch)
BNPP SA (Guernsey branch)
BNPP SA (Hong Kong branch)
BNPP SA (Luxembourg branch)Luxembourg
BNPP SA (Malaysia branch)
BNPP SA (Netherlands branch)Netherlands
BNPP SA (Philippines branch)
BNPP SA (Portugal branch)
BNPP SA (Republic of Korea
BNPP SA (Saudi Arabia branch)Saudi Arabia
BNPP SA (Singapore branch)
BNPP SA (South Africa branch)
BNPP SA (Switzerland branch)
BNPP SA (Thailand branch)
BNPP SA (Viet Nam branch)
CORPORATE & INSTITUTIONAL BANKING
EMEA (Europe, Middle East, Africa)
Financi\u00e8re Paris Haussmann(s)France
BNPP Financial Markets (Ex-
Participations Op\u00e9ra(s)
d'Int\u00e9gration Boursi\u00e8re
restated according to IFRS 17 and 9
Compagnie d'Investissement
Compagnie d'Investissement
Ellipsis Asset Management
Exane (Switzerland branch)
Exane Derivatives (Switzerland
Exane Derivatives (United
Exane Derivatives Gerance
Financi\u00e8re des Italiens(s)
Financi\u00e8re du March\u00e9 Saint
Financi\u00e8re Taitbout(s)
d'Int\u00e9gration Boursi\u00e8re
BNP Paribas, a soci\u00e9t\u00e9 anonyme (Public Limited Company), registered in France, is the Group's lead company, which holds key positions in its three
operating divisions: Corporate & Institutional Banking (CIB), Commercial, Personal Banking & Services (CPBS) and Investment & Protection Services (IPS).
During the year, the parent company did not change its name. BNP Paribas has its principal place of business in France and its head office is located at
16 boulevard des Italiens 75009 Paris, France.
9.k SCOPE OF CONSOLIDATION
restated according to IFRS 17 and 9
SNC Taitbout Participation 3
Soci\u00e9t\u00e9 Orbaisienne de
BNPP VPG Brookline Cre LLC(s)
Aquarius + Investments PLC(t)
BNPP Ireland Unlimited Co
BNPP Vartry Reinsurance DAC
BNPP Securities Japan Ltd
Expo Indico EIII Investimentos
BNPP Securities Korea Co Ltd
Banque de Wallis et Futuna
Matchpoint Finance PLC(t)
Ribera Del Loira Arbitrage
Single Platform Investment
BNPP Capital Services Inc
BNPP Colombia Corporacion
BNPP Financial Services LLC
BNPP IT Solutions Canada Inc
BNPP Mexico SA Institucion
restated according to IFRS 17 and 9
BNPP Proprietario Fundo de
Investimento Multimercado(s)
BNPP US Wholesale Holdings
Dale Bakken Partners 2012 LLC
BNPP Arbitrage Hong Kong Ltd
BNPP Finance Hong Kong Ltd
BNPP India Holding Private Ltd
BNPP Securities Taiwan Co Ltd
BNPP Sekuritas Indonesia Pt
COMMERCIAL, PERSONAL BANKING & SERVICES
COMMERCIAL & PERSONAL BANKING IN THE EUROZONE
Commercial & Personal Banking in France
2SF - Soci\u00e9t\u00e9 des Services
BNPP D\u00e9veloppement Oblig
BNPP Factor (Portugal branch)
BNPP Factor (Spain branch)
BNPP Nouvelle Cal\u00e9donie
Soci\u00e9t\u00e9 Lairoise de
restated according to IFRS 17 and 9
International Factors Italia SPA
Sviluppo HQ Tiburtina SRL
Tierre Securitisation SRL(t)
Worldline Merchant Services
Commercial & Personal Banking in Belgium
Bancontact Paytoniq Company
BNPP Group Service Center SAPoland
Banking Funding Company SA
BNPP Solutions Spolka ZOO
BNPP Commercial Finance Ltd
BNPP Fortis (Spain branch)
BNPP Fortis (United States
Cr\u00e9dit pour Habitations
Immobili\u00e8re Sauveniere SA
Private Equity Investments (a)
Commercial & Personal Banking in Luxembourg
BGL BNPP (Germany branch)
Compagnie Financi\u00e8re
COMMERCIAL & PERSONAL BANKING OUTSIDE THE EUROZONE
restated according to IFRS 17 and 9
Banque Internationale pour le
Commerce et l'Industrie de la
Banque Internationale pour
le Commerce et l'Industrie
BNPP Faktoring Spolka ZOO
BNPP Yatirimlar Holding AS
BancWest Holding Inc Grantor
Bank of the West Auto Trust
Bank of the West Auto Trust
Bank of the West Auto Trust
BOW Auto Receivables LLC(t)
BWC Opportunity Fund 2 Inc(t)
BWC Opportunity Fund Inc(t)
CFB Community Development
Claas Financial Services LLC
Commercial Federal Affordable
First Santa Clara Corp(s)
United California Bank Deferred
Compensation Plan Trust(s)
restated according to IFRS 17 and 9
Autonoria Spain 2021 FT(t)
Autonoria Spain 2022 FT(t)
Autonoria Spain 2023 FT(t)
BGN Mercantil E Servicos Ltda
BNPP Personal Finance (Czech
BNPP Personal Finance South
BON BNPP Consumer Finance
Central Europe Technologies
Cetelem Business Consulting
Cetelem Servicios SA de CV
Creation Financial Services Ltd
Cr\u00e9dit Moderne Antilles
Cr\u00e9dit Moderne Oc\u00e9an Indien
GCC Consumo Establecimiento
Genius Auto Finance Co Ltd
International Development
restated according to IFRS 17 and 9
Personal Finance Location
Securitisation funds Genius
Securitisation funds UCI and
Securitisation funds Wisdom
Servicios Financieros Carrefour
Stellantis Bank SA (Ex- Opel
Stellantis Bank SA (Austria
branch) (Ex- Opel Bank (Austria
Stellantis Bank SA (Germany
Stellantis Bank SA (Italy
branch) (Ex- Opel Bank (Italy
Stellantis Bank SA (Spain
branch) (Ex- Opel Bank (Spain
Stellantis Financial Services
Vauxhall Finance Ltd (Ex-
Arval Hellas Car Rental SA
Arval Service Lease Aluger
Operational Automoveis SA
Arval Service Lease Italia SPA
Arval Service Lease Polska
Arval Service Lease Romania
restated according to IFRS 17 and 9
Arval UK Leasing Services Ltd
Public Location Longue Dur\u00e9e
Rentaequipos Leasing Peru SA
TEB Arval Arac Filo Kiralama AS
Terberg Leasing Justlease
BNPP 3 Step IT (Italy branch)
BNPP 3 Step IT (Netherlands
BNPP 3 Step IT (Spain branch)
BNPP 3 Step IT (United Kingdom
BNPP Finansal Kiralama AS
BNPP Lease Group (Germany
BNPP Lease Group (Portugal
BNPP Leasing Solutions AB
BNPP Leasing Solutions AS
Electroniques (Spain branch)
BNPP Leasing Solutions GmbH
(Ex- All In One Vermietung)
BNPP Leasing Solutions IFN SARomania
BNPP Leasing Solutions Ltd
BNPP Leasing Solutions NV
BNPP Rental Solutions Ltd
BNPP Rental Solutions SPA
Claas Financial Services (Italy
restated according to IFRS 17 and 9
Claas Financial Services (Spain
Claas Financial Services Ltd
CNH Industrial Capital Europe
CNH Industrial Capital Europe
CNH Industrial Capital Europe
CNH Industrial Capital Europe
CNH Industrial Capital Europe
CNH Industrial Capital Europe
Folea Grundstucksverwaltungs
Heffiq Heftruck Verhuur BV
JCB Finance (Germany branch)
JCB Finance (Italy branch)
Financi\u00e8re des Paiements
Financi\u00e8re des Paiements
Financi\u00e8re des Paiements
Financi\u00e8re des Paiements
Financi\u00e8re des Paiements
Espresso Financial Services
Geojit Technologies Private Ltd
INVESTMENT & PROTECTION SERVICES
restated according to IFRS 17 and 9
Batipart Participations SAS
BNPP Actions Croissance(s)
BNPP Best Selection Actions
BNPP Cardif General Insurance
BNPP Cardif Hayat Sigorta AS
BNPP Cardif Livforsakring AB
BNPP Cardif Livforsakring AB
BNPP Cardif Livforsakring AB
BNPP Cardif Pojistovna AS
BNPP Cardif TCB Life Insurance
BNPP Cardif Vita Compagnia
BNPP CP Cardif Alternative(s)
BNPP CP Cardif Private Debt(s)
BNPP France Cr\u00e9dit(s)
BNPP Global Senior Corporate
BNPP Moderate Focus Italia(s)
BNPP Mon\u00e9taire Assurance(s)
BNPP Multistrat\u00e9gies
BNPP S\u00e9lection Dynamique
BNPP S\u00e9lection Flexible(s)
BNPP Smallcap Euroland(s)
BOB Cardif Life Insurance
Camgestion Obliflexible(s)
Cardif Alternatives Part I(s)
Cardif Assurance Vie (Austria
Cardif Assurance Vie (Belgium
Cardif Assurance Vie (Bulgaria
restated according to IFRS 17 and 9
Cardif Assurance Vie (Germany
Cardif Assurance Vie (Italy
Cardif Assurance Vie (Portugal
Cardif Assurance Vie (Romania
Cardif Assurance Vie (Spain
Cardif Assurance Vie (Taiwan
Cardif Assurances Risques
Cardif Assurances Risques
Cardif Assurances Risques
Cardif Assurances Risques
Cardif Assurances Risques
Cardif Assurances Risques
Cardif Assurances Risques
Divers (Netherlands branch)
Cardif Assurances Risques
Cardif Assurances Risques
Cardif Assurances Risques
Cardif Assurances Risques
Cardif Assurances Risques
Divers (Switzerland branch)
Cardif Assurances Risques
Cardif Biztosito Magyarorszag
Cardif BNPP AM Euro Paris
Cardif BNPP AM Global Senior
Cardif BNPP AM Sustainable
Euro Equity (Ex- Natio Fonds
Cardif BNPP AM Sustainable
Europe Equity (Ex- Natio Fonds
Cardif BNPP IP Convertibles
Cardif BNPP IP Signatures(s)
Cardif CPR Global Return(s)
Cardif do Brasil Seguros e
Cardif Edrim Signatures(s)
Cardif Forsakring AB (Denmark
restated according to IFRS 17 and 9
Cardif Forsakring AB (Norway
Cardif Insurance Holdings PLC
(Ex- Cardif Pinnacle Insurance
Cardif Life Insurance Co Ltd
Cardif Life Insurance Japan
Cardif Non Life Insurance
Cardif Pinnacle Insurance
Cardif Polska Towarzystwo
Cardif Support Unipessoal Lda
Cardif Vita Convex Fund Eur(s)
Centre Commercial Francilia
CFH Alexanderplatz Hotel SARLLuxembourg
CFH Bercy Interm\u00e9diaire
Diversipierre Germany GmbH
Fonci\u00e8re Partenaires(s)
Immobiliers pour le Commerce
FP Cardif Convex Fund USD(s)
restated according to IFRS 17 and 9
Natio Fonds Amp\u00e8re 1(s)
New Alpha Cardif Incubator
OC Health Real Estate GmbH
Paris Management Consultant
Permal Cardif Co Investment
Poistovna Cardif Slovakia AS
Schroder European Operating
SCI D\u00e9fense Vend\u00f4me
SCI Paris Cours de Vincennes
SCI Paris Grande Arm\u00e9e
SCI Saint Denis Mitterrand
SCI Vend\u00f4me Ath\u00e8nes
SCI Villeurbanne Stalingrad
Seniorenzentren Deutschland
Seniorenzentrum Heilbronn
Wolfratshausen Objekt GmbH
Services Epargne Entreprise
restated according to IFRS 17 and 9
Soci\u00e9t\u00e9 Francaise
Soci\u00e9t\u00e9 Immobili\u00e8re du Royal
Theam Quant Europe Climate
Gambit Financial Solutions
Tikehau Cardif Loan Europe(s)
Kapitalforvaltning AS (Sweden
Bancoestado Administradora
Baroda BNPP AMC Private Ltd
BNPP Agility Fund Private
France (Netherlands branch)
BNPP Asset Management USA
BNPP B Institutional II(s)
restated according to IFRS 17 and 9
Fundquest Advisor (United
Haitong Fortis Private Equity
HFT Investment Management
SME Alternative Financing
Auguste Thouard Expertise
BNPP Immobilier Promotion
BNPP Immobilier Promotion
BNPP Immobilier R\u00e9sidences
BNPP Immobilier R\u00e9sidentiel
BNPP Real Estate (United Arab
BNPP Real Estate Advisory
BNPP Real Estate Advisory &
Property Management UK Ltd
BNPP Real Estate Advisory
BNPP Real Estate Advisory
BNPP Real Estate Advisory
BNPP Real Estate Belgium SA
(Ex- BNPP Real Estate Holding
BNPP Real Estate Facilities
BNPP Real Estate Financial
BNPP Real Estate Investment
BNPP Real Estate Investment
BNPP Real Estate Investment
BNPP Real Estate Investment
BNPP Real Estate Investment
BNPP Real Estate Investment
Lisbon Representative Office
BNPP Real Estate Investment
BNPP Real Estate Investment
BNPP Real Estate Investment
restated according to IFRS 17 and 9
BNPP Real Estate Investment
BNPP Real Estate Investment
BNPP Real Estate Investment
BNPP Real Estate Italy SRL
BNPP Real Estate Portugal
BNPP Real Estate Property
BNPP Real Estate Property
BNPP Real Estate Property
BNPP Real Estate Property
BNPP Real Estate Property
BNPP Real Estate Singapore
BNPP Real Estate Spain SA
BNPP Real Estate Transaction
BNPP Real Estate Valuation
Construction-Sale Companies
Exeo Aura & Echo Offices Lda
restated according to IFRS 17 and 9
Property Companies (Property Used In Operations) and Others
BNPP Partners for Innovation
BNPP Partners for Innovation
BNPP Partners for Innovation
Euro Secured notes Issuer(s)
GIE Groupement Auxiliaire
GIE Groupement d'Etudes et
(a) At31 December 2023, 14 Private Equity investment entities versus 14 Private Equity investment entities at
(b) At31 December 2023, the securitisation funds UCI and RMBS Prado include 13 funds (FCC UCI 11, 12, 14 to 17,
RMBS Prado VII to XI, Green Belem I and RMBS Belem No 2) versus 14 funds (FCC UCI 11, 12, 14 to 17, RMBS Prado
V to X, Green Belem I and RMBS Belem No 2) at 31 December 2022.
(c) At31 December 2023, 117 Construction-sale companies (82 Full and 35 Equity) versus 125 Construction-sale
companies (91 Full and 34 Equity) at 31 December 2022.
(d) At31 December 2023, the securitisation funds Genius include 11 funds (Generation 2021-4 Retail Auto Mortgage
Loan Securitisation, Generation 2022-1 to 5 Retail Auto Mortgage Loan Securitisation, Generation 2023-1 to 5
Retail Auto Mortgage Loan Securitisation).
(e) At31 December 2023, the securitisation funds Wisdom include 13 funds (Wisdom Puhua Leasing 2021-2 & 3
Asset-Backed Securities, Wisdom Puhua Leasing 2022-1 Asset-Backed notes, Wisdom Puhua Leasing 2022-1
to 3 Asset-Backed Securities, Wisdom Puhua Leasing 2023-1 & 2 Asset-Backed notes, Wisdom Puhua Leasing
2023-1 & 2 Asset-Backed securities, Wisdom Puhua Leasing Zhixing 2023-1 & 2 Asset-Backed notes, Wisdom
Puhua Leasing Xinghe 2023-1 Asset-Backed Securities).
As requested by the ANC 2016 regulation, the list of entities that are controlled by the Group, jointly controlled or under significant influence, but
excluded from the scope of consolidation since their contribution to the consolidated financial statements would be immaterial to the Group, and the
Changes in the scope of consolidation
New entries (E) in the scope of consolidation
Passing qualifying thresholds
E3 Purchase,gain of control or significant influence
Removals (S) from the scope of consolidation
S1 Cessationof activity (dissolution, liquidation, etc.)
S2 Disposal,loss of control or loss of significant influence
S3 Passingqualifying thresholds
S4 Merger,Universal transfer of assets and liabilities
Variance (V) in voting or ownership interest
D1 Consolidationmethod change not related to fluctuation in voting or ownership interest
D2 Entitiesof a business held for sale
D3 Followingthe additional purchase of interest by BNP Paribas Group in 2022, Compagnie pour le Financement
des Loisirs was fully consolidated.
D4 Followingthe partial disposal by the Group in 2022, Worldline Merchant Services Italia SPA was consolidated
D5 Followingthe additional purchase of interest by BNP Paribas Group in 2022, bpost bank was fully consolidated.
D6 Followingthe partial disposal by the Group in 2022, Baroda BNPP AMC Private Ltd was consolidated under the
D7 Followingthe additional acquisition carried out by the Group, Arval Relsa and its subsidiaries are now
D8 Followingthe additional acquisition carried out by the Group, Kantox Holding and its subsidiaries are now
D9 Followingthe additional purchase of interest by the Group on 16 October 2023, Luizaseg Seguros SA is now fully
Equity* Controlledbut non-material entities consolidated under the equity method as associates
FV Jointcontrol or investment in associates measured at fair value through profit or loss
Prudential scope of consolidation
(1) Frenchsubsidiaries for which supervision of prudential requirements is complied with through the supervision
on a consolidated basis of BNP Paribas SA, in accordance with article 7.1 of Regulation n\u00b0575/2013 of the
European Parliament and of the Council.
(2) Entitiesconsolidated under the equity method in the prudential scope.
(3) Jointlycontrolled entities under proportional consolidation in the prudential scope.
(4) Collectiveinvestment undertaking excluded from the prudential scope.
Controlled enterprises are fully consolidated. The Group controls a
subsidiary when it is exposed, or has rights, to variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity.
For entities governed by voting rights, the Group generally controls the
entity if it holds, directly or indirectly, the majority of the voting rights
(and if there are no contractual provisions that alter the power of these
voting rights) or if the power to direct the relevant activities of the entity
is conferred on it by contractual agreements.
Structured entities are entities established so that they are not
governed by voting rights, for instance when those voting rights relate
to administrative tasks only, whereas the relevant activities are directed
by means of contractual arrangements. They often have the following
features or attributes: restricted activities, a narrow and well-defined
objective and insufficient equity to permit them to finance their activities
without subordinated financial support.
For these entities, the analysis of control shall consider the purpose
and design of the entity, the risks to which the entity is designed to be
exposed and to what extent the Group absorbs the related variability. The
assessment of control shall consider all facts and circumstances able
to determine the Group's practical ability to make decisions that could
significantly affect its returns, even if such decisions are contingent on
uncertain future events or circumstances.
In assessing whether it has power, the Group considers only substantive
rights which it holds or which are held by third parties. For a right to be
substantive, the holder must have the practical ability to exercise that
right when decisions about the relevant activities of the entity need to
Control is reassessed if facts and circumstances indicate that there are
changes to one or more of the elements of control.
Where the Group contractually holds the decision-making power, for
instance where the Group acts as fund manager, it shall determine
whether it is acting as agent or principal. Indeed, when associated with
a certain level of exposure to the variability of returns, this decision-
making power may indicate that the Group is acting on its own account
and that it thus has control over those entities.
Minority interests are presented separately in the consolidated profit
and loss account and balance sheet within consolidated equity. The
calculation of minority interests takes into account the outstanding
cumulative preferred shares classified as equity instruments issued by
subsidiaries, when such shares are held outside the Group.
As regards fully consolidated funds, units held by third-party investors
are recognised as debts at fair value through profit or loss, inasmuch as
they are redeemable at fair value at the subscriber's initiative.
For transactions resulting in a loss of control, any equity interest retained
by the Group is remeasured at its fair value through profit or loss.
Companies over which the Group exercises significant influence or
associates are accounted for by the equity method. Significant influence
is the power to participate in the financial and operating policy decisions
of a company without exercising control. Significant influence is presumed
to exist when the Group holds, directly or indirectly, 20% or more of the
voting rights of a company. Interests of less than 20% can be included
in the consolidation scope if the Group effectively exercises significant
influence. This is the case for example for entities developed in partnership
with other associates, where the BNP Paribas Group participates in
strategic decisions of the enterprise through representation on the Board
of directors or equivalent governing body, or exercises influence over
the enterprise's operational management by supplying management
systems or senior managers, or provides technical assistance to support
the enterprise's development.
Changes in the net assets of associates (companies accounted for under
the equity method) are recognised on the assets side of the balance
sheet under \"Investments in equity-method entities\" and in the relevant
component of shareholders' equity. Goodwill recorded on associates is
also included under \"Equity-method investments\".
Whenever there is an indication of impairment, the carrying amount
of the investment consolidated under the equity method (including
goodwill) is subjected to an impairment test, by comparing its recoverable
value (the higher of value-in-use and market value less costs to sell) to
its carrying amount. Where appropriate, impairment is recognised under
\"Share of earnings of equity-method entities\" in the consolidated income
statement and can be reversed at a later date.
If the Group's share of losses of an equity-method entity equals or
exceeds the carrying amount of its investment in this entity, the Group
discontinues including its share of further losses. The investment is
reported at nil value. Additional losses of the equity-method entity are
provided for only to the extent that the Group has contracted a legal or
constructive obligation or has made payments on behalf of this entity.
Where the Group holds an interest in an associate, directly or indirectly
through an entity that is a venture capital organisation, a mutual fund, an
Translation of accounts expressed in foreign
The consolidated financial statements of BNP Paribas are prepared in
The financial statements of enterprises whose functional currency is
not the euro are translated using the closing rate method. Under this
method, all assets and liabilities, both monetary and non-monetary, are
translated using the spot exchange rate at the balance sheet date. Income
and expense items are translated at the average rate for the period.
Financial statements of the Group's subsidiaries located in hyperinflationary
economies, previously adjusted for inflation by applying a general price
index, are translated using the closing rate. This rate applies to the
translation of assets and liabilities as well as income and expenses.
Differences arising from the translation of balance sheet items and profit
and loss items are recorded in shareholders' equity under \"Exchange
differences\", and in \"Minority interests\" for the portion attributable to
outside investors. Under the optional treatment permitted by IFRS 1,
the Group has reset to zero all translation differences, by booking all
cumulative translation differences attributable to shareholders and to
minority interests in the opening balance sheet at 1 January 2004 to
On liquidation or disposal of some or all of an interest held in a foreign
enterprise located outside the Eurozone, leading to a change in the nature
of the investment (loss of control, loss of significant influence or loss
of joint control without keeping a significant influence), the cumulative
exchange difference at the date of liquidation or sale is recognised in the
Should the percentage of interest change without leading to a modification
in the nature of the investment, the exchange difference is reallocated
between the portion attributable to shareholders and that attributable
to minority interests if the entity is fully consolidated; if the entity is
consolidated under the equity method, it is recorded in profit or loss for
the portion related to the interest sold.
1.c TRANSLATION OF FOREIGN CURRENCY
The methods used to account for assets and liabilities relating to foreign
currency transactions entered into by the Group, and to measure the
foreign exchange risk arising on such transactions, depend on whether
the asset or liability in question is classified as a monetary or a non-
Monetary assets and liabilities(2) expressed
Monetary assets and liabilities expressed in foreign currencies are
translated into the functional currency of the relevant Group entity at
the closing rate. Foreign exchange differences are recognised in the profit
and loss account, except for those arising from financial instruments
designated as a cash flow hedge or a net foreign investment hedge, which
are recognised in shareholders' equity.
Non-monetary assets and liabilities expressed
Non-monetary assets may be measured either at historical cost or at
fair value. Non-monetary assets expressed in foreign currencies are
translated using the exchange rate at the date of the transaction (i.e. date
of initial recognition of the non-monetary asset) if they are measured at
historical cost, and at the closing rate if they are measured at fair value.
Foreign exchange differences relating to non-monetary assets
denominated in foreign currencies and recognised at fair value (equity
instruments) are recognised in profit or loss when the asset is classified
in \"Financial assets at fair value through profit or loss\" and in equity
when the asset is classified under \"Financial assets at fair value through
Goodwill by cash-generating unit is as follows:
Corporate & Institutional
Commercial, Personal Banking
The Group carried out a detailed analysis of goodwill to identify whether
impairments were necessary in connection with the health crisis.
This analysis is based in particular on the assumptions of economic
scenarios (see note 3.g).
The cash-generating units (CGU) to which goodwill is allocated are:
Global Banking: Global Banking combines financing solutions to
corporates, all transaction banking products, corporate finance advisory
services in mergers and acquisitions and primary equity activities.
Global Markets: Global Markets provides investment, hedging, financing
and research services across asset classes, to corporate and institutional
clients \u2013 as well as private and retail banking networks. The sustainable,
long-term business model of Global Markets connects clients to capital
markets throughout EMEA (Europe, Middle East & Africa), Asia Pacific
and the Americas, with innovative solutions and digital platforms. Global
Markets includes activities of Global Macro (Foreign Exchange, Global
Rates, Local Markets, Commodity Derivatives), Global Credit (DCM Bonds,
Credit, Securitisation) and Global Equities (Equities, Cash Equities and
Securities Services: Securities Services provides integrated solutions for
all actors involved in the investment cycle, sell side, buy side and issuers.
BNP Paribas is one of the major global players in securities services.
Arval: Specialist in vehicle long-term leasing and mobility, Arval offers
corporates (from multinational companies to small and medium
companies), employees and individuals tailored solutions that optimise
Leasing Solutions: BNP Paribas Leasing Solutions uses a multi-channel
partnership approach (sales via referrals, partnerships, direct sales and
banking networks) to offer corporate and small business clients an array
of leasing and rental solutions, ranging from equipment financing to
Personal Finance: BNP Paribas Personal Finance is the Group's consumer
credit specialist. Through its brands and partnerships such as Cetelem,
Cofinoga, Findomestic, AlphaCredit or Stellantis Financial Services,
Personal Finance provides a full range of consumer loans at point of
sale (retail stores and car dealerships) or through its customer relation
centres and websites and mobile applications. The business line, in
some countries outside the Domestic Markets, is integrated into the
BNP Paribas Group's retail banking.
Personal Investors: BNP Paribas Personal Investors is a digital specialist
of banking and investment services. Based in Germany and India, it
provides a wide range of banking, savings and long and short-term
investment services to individual clients via the internet, and also on
the phone and face-to-face. In addition to its activities destined to
private clients, Personal Investors offers its services and IT platform to
independent financial consultants, asset managers and FinTechs.
New Digital Businesses: they include the account management service
\"Nickel\" and Floa since January 2022. Nickel is open to all, without any
conditions regarding income, deposits or personal wealth, and without
any overdraft or credit facility. This service, which operates in real time
using the latest technology, is available through over 10,000 points of sale
in France, Spain, Belgium, Portugal and Germany. Floa offers consumers
split payments, mini-loans and bank cards. The Company is a partner of
major e-retailers, key players in travel and FinTechs, for which it develops
tailor-made services. Already leader in France in payment facilities, Floa
is present in Spain, Belgium, Italy and Portugal.
Asset Management: BNP Paribas Asset Management is the dedicated asset
management business line of the BNP Paribas Group and offers services
to individual investors (through internal distributors \u2013 BNP Paribas
private and retail banking \u2013 and external distributors), to corporates and
to institutional investors (insurance companies, retirement funds, official
institutions). Its aim is to offer an added value based on a broad range
of expertise throughout its active management of equities and bonds, its
activity of private debt, private asset and real asset management and its
multi-asset, quantitative and solutions division.
Insurance: BNP Paribas Cardif, a world leader in personal insurance,
has designed, developed and marketed savings and protection products
and services to protect individuals, their projects and their assets.
BNP Paribas Cardif also offers products in damage insurance, health
insurance, budget insurance, revenue and means of payment insurance,
unexpected event protection (unemployment, accident, death, theft or
breakage) or the protection of private digital data to meet the evolution
Real Estate: BNP Paribas Real Estate serves the needs of its clients,
whether institutional investors, corporates, public entities or individuals,
at all stages of the life cycle of their property (from the conception of a
construction project to its daily management).
Wealth Management: Wealth Management encompasses the Private
Banking activities of BNP Paribas and serves a clientele of wealthy
individuals, shareholder families and entrepreneurs seeking a one-stop
shop for all their wealth management and financial needs.
Goodwill impairment tests are based on three different methods:
observation of transactions related to comparable businesses, share price
data for listed companies with comparable businesses, and discounted
If one of the two comparables-based methods indicates the need for
impairment, the DCF method is used to validate the results and determine
the amount of impairment required.
The DCF method is based on a number of assumptions in terms of future
revenues, expenses and cost of risk (cash flows) based on medium-term
business plans over a period of five years. Cash flow projections beyond
the 5-year forecast period are based on a growth rate to perpetuity and
are normalised when the short-term environment does not reflect the
normal conditions of the economic cycle.
The key parameters which are sensitive to the assumptions made are
the cost of capital, the cost/income ratio, the cost of risk and the growth
Cost of capital is determined on the basis of a risk-free rate, an observed
market risk premium weighted by a risk factor based on comparables
specific to each cash-generating unit. The values of these parameters
are obtained from external information sources.
Allocated capital is determined for each cash-generating unit based on
the \"Common Equity Tier One\" regulatory requirements for the legal
entity to which the cash-generating unit belongs, with a minimum of 7%.
The growth rate to perpetuity used is 2% for mature economies in Europe.
For CGUs implemented in countries with high levels of inflation, a specific
add-on is taken into account (calculated according to inflation rates
disclosed by external sources).
The following table shows the sensitivity of the valuation of the Personal
Finance cash-generating unit to changes in the value of parameters
used in the DCF calculation: the cost of capital, the cost/income ratio
in terminal value, the cost of risk in terminal value and the growth rate
9.d BUSINESS COMBINATIONS AND LOSS OF
CONTROL OR SIGNIFICANT INFLUENCE
Partnership with Stellantis
On 3 April 2023, BNP Paribas Personal Finance became the exclusive
partner of Stellantis captive company in its financing activities across
three strategic markets: Germany, Austria and the United Kingdom.
This operation involved the purchase of three entities in these three
countries, in conjunction with the sale of activities to various Stellantis
joint ventures in France, Italy and Spain.
This restructuring increased the Group's balance sheet by EUR 8 billion, in
particular in financial assets at amortised cost, and led to the recognition
of a net gain on disposal of EUR 54 million and of a goodwill of EUR
On 3 January 2022, BNP Paribas Fortis purchased the residual 50% stake
The Group BNP Paribas took therefore exclusive control of this entity and
fully consolidated it from the first quarter of 2022.
Consequently, this operation increased the Group's balance sheet by
EUR 12 billion at the acquisition date, in particular EUR 11 billion in
financial assets at amortised cost and led to the recognition of badwill
of EUR 245 million in the profit and loss account.
On 4 January 2022, Banca Nazionale del Lavoro sold 80% of its stake of
Wordline Merchant Services Italia (ex-Axepta Spa).
The Group BNP Paribas lost exclusive control of this entity but kept a
The disposal led to the recognition of a result of EUR 204 million on the
line \"Net gain on non-current assets\".
The residual stake of 20% was consolidated using the equity method for
its remeasured value, including goodwill of EUR 41 million.
On 31 January 2022, BNP Paribas purchased 100% of Floa.
The Group BNP Paribas took exclusive control of this entity and fully
consolidated it from the first quarter of 2022.
The Group's balance sheet increased by EUR 2 billion at the acquisition
date, in particular in financial assets at amortised cost.
The goodwill related to this operation was EUR 122 million.
In the context of the conflict in Ukraine, the Group reassessed the nature
of control over its subsidiary UkrSibbank and concluded to the loss
of exclusive control, and the maintain of a significant influence. This
situation led the Group to consolidate the entity using the equity method
The loss of exclusive control involved the recognition of a loss on disposal
of -EUR 159 million and the reclassification to the profit and loss account
of cumulated changes in assets and liabilities for exchange differences
of -EUR 274 million, in \"Net gain on non-current assets\".
The Group's balance sheet decreased by EUR 2 billion at the date of loss
of exclusive control, in particular in financial assets at amortised cost.
On 30 November 2022, Arval Service Lease purchased 100% of Terberg
The Group BNP Paribas took exclusive control of these entities and fully
consolidated them from the last quarter of 2022.
The Group's balance sheet increased by EUR 1 billion at the acquisition
date, in particular in tangible assets.
The goodwill related to this operation was EUR 92 million.
1.b.4 Businesscombinations and
Business combinations are accounted for using the purchase method.
Under this method, the acquiree's identifiable assets and liabilities
assumed are measured at fair value at the acquisition date except for
non-current assets classified as assets held for sale which are accounted
for at fair value less costs to sell.
The acquiree's contingent liabilities are not recognised in the consolidated
balance sheet unless they represent a present obligation on the
acquisition date and their fair value can be measured reliably.
The cost of a business combination is the fair value, at the date of
exchange, of assets given, liabilities incurred or assumed, and equity
instruments issued to obtain control of the acquiree. Costs directly
attributable to the business combination are treated as a separate
transaction and recognised through profit or loss.
Any contingent consideration is included in the cost, as soon as control is
obtained, at fair value on the date when control was acquired. Subsequent
changes in the value of any contingent consideration recognised as a
financial liability are recognised through profit or loss.
The Group may recognise any adjustments to the provisional accounting
within 12 months of the acquisition date.
Goodwill represents the difference between the cost of the combination
and the acquirer's interest in the net fair value of the identifiable assets
and liabilities of the acquiree at the acquisition date. Positive goodwill
is recognised in the acquirer's balance sheet, while negative goodwill is
recognised immediately in profit or loss, on the acquisition date. Minority
interests are measured at their share of the fair value of the acquiree's
identifiable assets and liabilities. However, for each business combination,
the Group can elect to measure minority interests at fair value, in which
case a proportion of goodwill is allocated to them. To date, the Group
has never used this latter option.
Goodwill is recognised in the functional currency of the acquiree and
translated at the closing exchange rate.
On the acquisition date, any previously held equity interest in the acquiree
is remeasured at its fair value through profit or loss. In the case of a step
acquisition, the goodwill is therefore determined by reference to the
acquisition-date fair value.
The BNP Paribas Group includes in \"Interest income\" and \"Interest
expense\" all income and expense calculated using the effective interest
method (interest, fees and transaction costs) from financial instruments
measured at amortised cost and financial instruments measured at fair
These items also include the interest income and expense of non-trading
financial instruments the characteristics of which do not allow for
recognition at amortised cost or at fair value through equity, as well as
of financial instruments that the Group has designated as at fair value
through profit or loss. The change in fair value on financial instruments at
fair value through profit or loss (excluding accrued interest) is recognised
under \"Net gain on financial instruments at fair value through profit or
Interest income and expense on derivatives accounted for as fair value
hedges are included with the revenues generated by the hedged item.
Similarly, interest income and expense arising from derivatives used to
hedge transactions designated as at fair value through profit or loss
is allocated to the same accounts as the interest income and expense
relating to the underlying transactions.
In the case of a negative interest rates related to loans and receivables
or deposits from customers and credit institutions, they are accounted
for in interest expense or interest income respectively.
restated according to IFRS 17 and 9
Financial instruments at amortised cost
Deposits, loans and borrowings
Issued debt securities and subordinated debt
Financial instruments at fair value through equity
Financial instruments at fair value through profit
or loss (Trading securities excluded)
Cash flow hedge instruments
Interest rate portfolio hedge instruments
TOTAL INTEREST INCOME/(EXPENSE)
Net interest income notably includes an expense of EUR 938 million due
to the adjustment of economic hedges consecutive to the changes in the
TLTRO terms and conditions mentioned below.
Net interest income includes funding costs related to Global Markets,
whose revenues are mainly accounted for in \"Net gain on financial
instruments at fair value through profit or loss\" (see note 3.c), as well
as to Arval, whose income from operating leases is presented in note 3.e.
The evolution of the net interest income is therefore to be analysed in
conjunction with those observed for these lines.
Interest income on individually impaired loans amounted to
EUR 342 million for the year ended 2023, compared to EUR 287 million
The Group subscribed to the TLTRO III (Targeted Longer-Term Refinancing
Operations) programme, as modified by the Governing Council of the
European Central Bank in March 2020, in December 2020 and in
October 2022 (see note 5.g). The Group achieved the lending performance
thresholds that enabled it to benefit from favourable interest rate
conditions applicable for each of the reference period, namely:
\u25a0 over the two special interest periods (i.e. from June 2020 to June 2022):
the average deposit facility rate (\"DFR\") -50 basis points, or -1%;
\u25a0 over the next period (i.e. from June 2022 to November 2022): the
average of the DFR between the TLTRO III initial date of subscription
and 22 November 2022, i.e. for the main draws, -0.36% for the
June 2020 tranche and -0.29% for the March 2021 tranche;
\u25a0 over the last period (since 23 November 2022): the average of the DFR
between 23 November 2022 and the redemption date. The average
effective interest rate for the latter period was 3.15% (1.64% until
31 December 2022 and 3.31% for the year 2023).
1.e NET INTEREST INCOME, COMMISSIONS
AND INCOME FROM OTHER ACTIVITIES
Income and expenses relating to debt instruments measured at amortised
cost and at fair value through shareholders' equity are recognised in the
income statement using the effective interest rate method.
The effective interest rate is the rate that ensures the discounted value
of estimated future cash flows through the expected life of the financial
instrument or, when appropriate, a shorter period, is equal to the carrying
amount of the asset or liability in the balance sheet. The effective interest
rate measurement takes into account all fees received or paid that are
an integral part of the effective interest rate of the contract, transaction
costs, and premiums and discounts.
Commissions considered as an additional component of interest are
included in the effective interest rate and are recognised in the profit
and loss account in \"Net interest income\". This category includes notably
commissions on financing commitments when it is considered that the
setting up of a loan is more likely than unlikely. Commissions received in
respect of financing commitments are deferred until they are drawn and
then included in the effective interest rate calculation and amortised over
the life of the loan. Syndication commissions are also included in this
category for the portion of the commission equivalent to the remuneration
of other syndication participants.
The BNP Paribas Group includes in \"Interest income\" and \"Interest
expense\" all income and expense calculated using the effective interest
method (interest, fees and transaction costs) from financial instruments
measured at amortised cost and financial instruments measured at fair
These items also include the interest income and expense of non-trading
financial instruments the characteristics of which do not allow for
recognition at amortised cost or at fair value through equity, as well as
of financial instruments that the Group has designated as at fair value
through profit or loss. The change in fair value on financial instruments at
fair value through profit or loss (excluding accrued interest) is recognised
under \"Net gain on financial instruments at fair value through profit or
Interest income and expense on derivatives accounted for as fair value
hedges are included with the revenues generated by the hedged item.
Similarly, interest income and expense arising from derivatives used to
hedge transactions designated as at fair value through profit or loss
is allocated to the same accounts as the interest income and expense
relating to the underlying transactions.
In the case of a negative interest rates related to loans and receivables
or deposits from customers and credit institutions, they are accounted
for in interest expense or interest income respectively.
restated according to IFRS 17 and 9
Financial instruments at amortised cost
Deposits, loans and borrowings
Issued debt securities and subordinated debt
Financial instruments at fair value through equity
Financial instruments at fair value through profit
or loss (Trading securities excluded)
Cash flow hedge instruments
Interest rate portfolio hedge instruments
TOTAL INTEREST INCOME/(EXPENSE)
Net interest income notably includes an expense of EUR 938 million due
to the adjustment of economic hedges consecutive to the changes in the
TLTRO terms and conditions mentioned below.
Net interest income includes funding costs related to Global Markets,
whose revenues are mainly accounted for in \"Net gain on financial
instruments at fair value through profit or loss\" (see note 3.c), as well
as to Arval, whose income from operating leases is presented in note 3.e.
The evolution of the net interest income is therefore to be analysed in
conjunction with those observed for these lines.
Interest income on individually impaired loans amounted to
EUR 342 million for the year ended 2023, compared to EUR 287 million
The Group subscribed to the TLTRO III (Targeted Longer-Term Refinancing
Operations) programme, as modified by the Governing Council of the
European Central Bank in March 2020, in December 2020 and in
October 2022 (see note 5.g). The Group achieved the lending performance
thresholds that enabled it to benefit from favourable interest rate
conditions applicable for each of the reference period, namely:
\u25a0 over the two special interest periods (i.e. from June 2020 to June 2022):
the average deposit facility rate (\"DFR\") -50 basis points, or -1%;
\u25a0 over the next period (i.e. from June 2022 to November 2022): the
average of the DFR between the TLTRO III initial date of subscription
and 22 November 2022, i.e. for the main draws, -0.36% for the
June 2020 tranche and -0.29% for the March 2021 tranche;
\u25a0 over the last period (since 23 November 2022): the average of the DFR
between 23 November 2022 and the redemption date. The average
effective interest rate for the latter period was 3.15% (1.64% until
31 December 2022 and 3.31% for the year 2023).
1.e NET INTEREST INCOME, COMMISSIONS
AND INCOME FROM OTHER ACTIVITIES
Income and expenses relating to debt instruments measured at amortised
cost and at fair value through shareholders' equity are recognised in the
income statement using the effective interest rate method.
The effective interest rate is the rate that ensures the discounted value
of estimated future cash flows through the expected life of the financial
instrument or, when appropriate, a shorter period, is equal to the carrying
amount of the asset or liability in the balance sheet. The effective interest
rate measurement takes into account all fees received or paid that are
an integral part of the effective interest rate of the contract, transaction
costs, and premiums and discounts.
Commissions considered as an additional component of interest are
included in the effective interest rate and are recognised in the profit
and loss account in \"Net interest income\". This category includes notably
commissions on financing commitments when it is considered that the
setting up of a loan is more likely than unlikely. Commissions received in
respect of financing commitments are deferred until they are drawn and
then included in the effective interest rate calculation and amortised over
the life of the loan. Syndication commissions are also included in this
category for the portion of the commission equivalent to the remuneration
of other syndication participants.
The BNP Paribas Group includes in \"Interest income\" and \"Interest
expense\" all income and expense calculated using the effective interest
method (interest, fees and transaction costs) from financial instruments
measured at amortised cost and financial instruments measured at fair
These items also include the interest income and expense of non-trading
financial instruments the characteristics of which do not allow for
recognition at amortised cost or at fair value through equity, as well as
of financial instruments that the Group has designated as at fair value
through profit or loss. The change in fair value on financial instruments at
fair value through profit or loss (excluding accrued interest) is recognised
under \"Net gain on financial instruments at fair value through profit or
Interest income and expense on derivatives accounted for as fair value
hedges are included with the revenues generated by the hedged item.
Similarly, interest income and expense arising from derivatives used to
hedge transactions designated as at fair value through profit or loss
is allocated to the same accounts as the interest income and expense
relating to the underlying transactions.
In the case of a negative interest rates related to loans and receivables
or deposits from customers and credit institutions, they are accounted
for in interest expense or interest income respectively.
restated according to IFRS 17 and 9
Financial instruments at amortised cost
Deposits, loans and borrowings
Issued debt securities and subordinated debt
Financial instruments at fair value through equity
Financial instruments at fair value through profit
or loss (Trading securities excluded)
Cash flow hedge instruments
Interest rate portfolio hedge instruments
TOTAL INTEREST INCOME/(EXPENSE)
Net interest income notably includes an expense of EUR 938 million due
to the adjustment of economic hedges consecutive to the changes in the
TLTRO terms and conditions mentioned below.
Net interest income includes funding costs related to Global Markets,
whose revenues are mainly accounted for in \"Net gain on financial
instruments at fair value through profit or loss\" (see note 3.c), as well
as to Arval, whose income from operating leases is presented in note 3.e.
The evolution of the net interest income is therefore to be analysed in
conjunction with those observed for these lines.
Interest income on individually impaired loans amounted to
EUR 342 million for the year ended 2023, compared to EUR 287 million
The Group subscribed to the TLTRO III (Targeted Longer-Term Refinancing
Operations) programme, as modified by the Governing Council of the
European Central Bank in March 2020, in December 2020 and in
October 2022 (see note 5.g). The Group achieved the lending performance
thresholds that enabled it to benefit from favourable interest rate
conditions applicable for each of the reference period, namely:
\u25a0 over the two special interest periods (i.e. from June 2020 to June 2022):
the average deposit facility rate (\"DFR\") -50 basis points, or -1%;
\u25a0 over the next period (i.e. from June 2022 to November 2022): the
average of the DFR between the TLTRO III initial date of subscription
and 22 November 2022, i.e. for the main draws, -0.36% for the
June 2020 tranche and -0.29% for the March 2021 tranche;
\u25a0 over the last period (since 23 November 2022): the average of the DFR
between 23 November 2022 and the redemption date. The average
effective interest rate for the latter period was 3.15% (1.64% until
31 December 2022 and 3.31% for the year 2023).
1.e NET INTEREST INCOME, COMMISSIONS
AND INCOME FROM OTHER ACTIVITIES
Income and expenses relating to debt instruments measured at amortised
cost and at fair value through shareholders' equity are recognised in the
income statement using the effective interest rate method.
The effective interest rate is the rate that ensures the discounted value
of estimated future cash flows through the expected life of the financial
instrument or, when appropriate, a shorter period, is equal to the carrying
amount of the asset or liability in the balance sheet. The effective interest
rate measurement takes into account all fees received or paid that are
an integral part of the effective interest rate of the contract, transaction
costs, and premiums and discounts.
Commissions considered as an additional component of interest are
included in the effective interest rate and are recognised in the profit
and loss account in \"Net interest income\". This category includes notably
commissions on financing commitments when it is considered that the
setting up of a loan is more likely than unlikely. Commissions received in
respect of financing commitments are deferred until they are drawn and
then included in the effective interest rate calculation and amortised over
the life of the loan. Syndication commissions are also included in this
category for the portion of the commission equivalent to the remuneration
of other syndication participants.
The BNP Paribas Group includes in \"Interest income\" and \"Interest
expense\" all income and expense calculated using the effective interest
method (interest, fees and transaction costs) from financial instruments
measured at amortised cost and financial instruments measured at fair
These items also include the interest income and expense of non-trading
financial instruments the characteristics of which do not allow for
recognition at amortised cost or at fair value through equity, as well as
of financial instruments that the Group has designated as at fair value
through profit or loss. The change in fair value on financial instruments at
fair value through profit or loss (excluding accrued interest) is recognised
under \"Net gain on financial instruments at fair value through profit or
Interest income and expense on derivatives accounted for as fair value
hedges are included with the revenues generated by the hedged item.
Similarly, interest income and expense arising from derivatives used to
hedge transactions designated as at fair value through profit or loss
is allocated to the same accounts as the interest income and expense
relating to the underlying transactions.
In the case of a negative interest rates related to loans and receivables
or deposits from customers and credit institutions, they are accounted
for in interest expense or interest income respectively.
restated according to IFRS 17 and 9
Financial instruments at amortised cost
Deposits, loans and borrowings
Issued debt securities and subordinated debt
Financial instruments at fair value through equity
Financial instruments at fair value through profit
or loss (Trading securities excluded)
Cash flow hedge instruments
Interest rate portfolio hedge instruments
TOTAL INTEREST INCOME/(EXPENSE)
Net interest income notably includes an expense of EUR 938 million due
to the adjustment of economic hedges consecutive to the changes in the
TLTRO terms and conditions mentioned below.
Net interest income includes funding costs related to Global Markets,
whose revenues are mainly accounted for in \"Net gain on financial
instruments at fair value through profit or loss\" (see note 3.c), as well
as to Arval, whose income from operating leases is presented in note 3.e.
The evolution of the net interest income is therefore to be analysed in
conjunction with those observed for these lines.
Interest income on individually impaired loans amounted to
EUR 342 million for the year ended 2023, compared to EUR 287 million
The Group subscribed to the TLTRO III (Targeted Longer-Term Refinancing
Operations) programme, as modified by the Governing Council of the
European Central Bank in March 2020, in December 2020 and in
October 2022 (see note 5.g). The Group achieved the lending performance
thresholds that enabled it to benefit from favourable interest rate
conditions applicable for each of the reference period, namely:
\u25a0 over the two special interest periods (i.e. from June 2020 to June 2022):
the average deposit facility rate (\"DFR\") -50 basis points, or -1%;
\u25a0 over the next period (i.e. from June 2022 to November 2022): the
average of the DFR between the TLTRO III initial date of subscription
and 22 November 2022, i.e. for the main draws, -0.36% for the
June 2020 tranche and -0.29% for the March 2021 tranche;
\u25a0 over the last period (since 23 November 2022): the average of the DFR
between 23 November 2022 and the redemption date. The average
effective interest rate for the latter period was 3.15% (1.64% until
31 December 2022 and 3.31% for the year 2023).
1.e NET INTEREST INCOME, COMMISSIONS
AND INCOME FROM OTHER ACTIVITIES
Income and expenses relating to debt instruments measured at amortised
cost and at fair value through shareholders' equity are recognised in the
income statement using the effective interest rate method.
The effective interest rate is the rate that ensures the discounted value
of estimated future cash flows through the expected life of the financial
instrument or, when appropriate, a shorter period, is equal to the carrying
amount of the asset or liability in the balance sheet. The effective interest
rate measurement takes into account all fees received or paid that are
an integral part of the effective interest rate of the contract, transaction
costs, and premiums and discounts.
Commissions considered as an additional component of interest are
included in the effective interest rate and are recognised in the profit
and loss account in \"Net interest income\". This category includes notably
commissions on financing commitments when it is considered that the
setting up of a loan is more likely than unlikely. Commissions received in
respect of financing commitments are deferred until they are drawn and
then included in the effective interest rate calculation and amortised over
the life of the loan. Syndication commissions are also included in this
category for the portion of the commission equivalent to the remuneration
of other syndication participants.
The BNP Paribas Group includes in \"Interest income\" and \"Interest
expense\" all income and expense calculated using the effective interest
method (interest, fees and transaction costs) from financial instruments
measured at amortised cost and financial instruments measured at fair
These items also include the interest income and expense of non-trading
financial instruments the characteristics of which do not allow for
recognition at amortised cost or at fair value through equity, as well as
of financial instruments that the Group has designated as at fair value
through profit or loss. The change in fair value on financial instruments at
fair value through profit or loss (excluding accrued interest) is recognised
under \"Net gain on financial instruments at fair value through profit or
Interest income and expense on derivatives accounted for as fair value
hedges are included with the revenues generated by the hedged item.
Similarly, interest income and expense arising from derivatives used to
hedge transactions designated as at fair value through profit or loss
is allocated to the same accounts as the interest income and expense
relating to the underlying transactions.
In the case of a negative interest rates related to loans and receivables
or deposits from customers and credit institutions, they are accounted
for in interest expense or interest income respectively.
restated according to IFRS 17 and 9
Financial instruments at amortised cost
Deposits, loans and borrowings
Issued debt securities and subordinated debt
Financial instruments at fair value through equity
Financial instruments at fair value through profit
or loss (Trading securities excluded)
Cash flow hedge instruments
Interest rate portfolio hedge instruments
TOTAL INTEREST INCOME/(EXPENSE)
Net interest income notably includes an expense of EUR 938 million due
to the adjustment of economic hedges consecutive to the changes in the
TLTRO terms and conditions mentioned below.
Net interest income includes funding costs related to Global Markets,
whose revenues are mainly accounted for in \"Net gain on financial
instruments at fair value through profit or loss\" (see note 3.c), as well
as to Arval, whose income from operating leases is presented in note 3.e.
The evolution of the net interest income is therefore to be analysed in
conjunction with those observed for these lines.
Interest income on individually impaired loans amounted to
EUR 342 million for the year ended 2023, compared to EUR 287 million
The Group subscribed to the TLTRO III (Targeted Longer-Term Refinancing
Operations) programme, as modified by the Governing Council of the
European Central Bank in March 2020, in December 2020 and in
October 2022 (see note 5.g). The Group achieved the lending performance
thresholds that enabled it to benefit from favourable interest rate
conditions applicable for each of the reference period, namely:
\u25a0 over the two special interest periods (i.e. from June 2020 to June 2022):
the average deposit facility rate (\"DFR\") -50 basis points, or -1%;
\u25a0 over the next period (i.e. from June 2022 to November 2022): the
average of the DFR between the TLTRO III initial date of subscription
and 22 November 2022, i.e. for the main draws, -0.36% for the
June 2020 tranche and -0.29% for the March 2021 tranche;
\u25a0 over the last period (since 23 November 2022): the average of the DFR
between 23 November 2022 and the redemption date. The average
effective interest rate for the latter period was 3.15% (1.64% until
31 December 2022 and 3.31% for the year 2023).
1.e NET INTEREST INCOME, COMMISSIONS
AND INCOME FROM OTHER ACTIVITIES
Income and expenses relating to debt instruments measured at amortised
cost and at fair value through shareholders' equity are recognised in the
income statement using the effective interest rate method.
The effective interest rate is the rate that ensures the discounted value
of estimated future cash flows through the expected life of the financial
instrument or, when appropriate, a shorter period, is equal to the carrying
amount of the asset or liability in the balance sheet. The effective interest
rate measurement takes into account all fees received or paid that are
an integral part of the effective interest rate of the contract, transaction
costs, and premiums and discounts.
Commissions considered as an additional component of interest are
included in the effective interest rate and are recognised in the profit
and loss account in \"Net interest income\". This category includes notably
commissions on financing commitments when it is considered that the
setting up of a loan is more likely than unlikely. Commissions received in
respect of financing commitments are deferred until they are drawn and
then included in the effective interest rate calculation and amortised over
the life of the loan. Syndication commissions are also included in this
category for the portion of the commission equivalent to the remuneration
of other syndication participants.
The Group records commission income and expense in profit or loss
\u25a0 over time as the service is rendered when the client receives
continuous service. These include, for example, certain commissions
on transactions with customers when services are rendered on a
continuous basis, commissions on financing commitments that are
not included in the interest margin, because the probability that
they give rise to the drawing up of a loan is low, commissions on
financial collateral, clearing commissions on financial instruments,
commissions related to trust and similar activities, securities custody
Commissions received under financial guarantee commitments are
deemed to represent the initial fair value of the commitment. The
resulting liability is subsequently amortised over the term of the
commitment, in commission income; or
\u25a0 at a point in time when the service is rendered, in other cases. These
include, for example, distribution fees received, loan syndication fees
remunerating the arrangement service, advisory fees, etc.
1.f.1 Financialassets at amortised cost
Financial assets are classified at amortised cost if the following two
criteria are met: the business model objective is to hold the instrument
in order to collect the contractual cash flows and the cash flows consist
solely of payments relating to principal and interest on the principal.
Financial assets are managed within a business model whose objective
is to hold financial assets in order to collect cash flows through the
collection of contractual payments over the life of the instrument.
The realisation of disposals close to the maturity of the instrument
and for an amount close to the remaining contractual cash flows, or
due to an increase in the counterparty's credit risk is consistent with a
business model whose objective is to collect the contractual cash flows
(\"collect\"). Sales imposed by regulatory requirements or to manage the
concentration of credit risk (without an increase in the asset's credit risk)
are also consistent with this business model when they are infrequent
or insignificant in value.
The cash flow criterion is satisfied if the contractual terms of the debt
instrument give rise, on specified dates, to cash flows that are solely
repayments of principal and interest on the principal amount outstanding.
The criterion is not met in the event of a contractual characteristic that
exposes the holder to risks or to the volatility of contractual cash flows
that are inconsistent with those of a non-structured or \"basic lending\"
arrangement. It is also not satisfied in the event of leverage that increases
the variability of the contractual cash flows.
Interest consists of consideration for the time value of money, for the
credit risk, and for the remuneration of other risks (e.g. liquidity risk),
costs (e.g. administration fees), and a profit margin consistent with that
of a basic lending arrangement. The existence of negative interest does
not call into question the cash flow criterion.
The time value of money is the component of interest - usually referred
to as the \"rate\" component - which provides consideration for only the
passage of time. The relationship between the interest rate and the
passage of time must not be modified by specific characteristics that
could call into question the respect of the cash flow criterion.
Thus, when the variable interest rate of the financial asset is periodically
reset at a frequency that does not match the duration for which the
interest rate is established, the time value of money may be considered
as modified and, depending on the significance of that modification, the
cash flow criterion may not be met. Some financial assets held by the
Group present a mismatch between the interest rate reset frequency
and the maturity of the index, or interest rates indexed to an average of
benchmark rate. The Group has developed a consistent methodology for
analysing this alteration of the time value of money.
Regulated rates meet the cash flow criterion when they provide
consideration that is broadly consistent with the passage of time and do
not expose to risks or volatility in the contractual cash flows that would
be inconsistent with those of a basic lending arrangement (example:
loans granted in the context of Livret A savings accounts).
Some contractual clauses may change the timing or the amount of cash
flows. Early redemption options do not call into question the cash flow
criterion if the prepayment amount substantially represents the principal
amount outstanding and the interest thereon, which may include
reasonable compensation for the early termination of the contract. For
example, as regards loans to retail customers, the compensation limited
to 6 months of interest or 3% of the capital outstanding is considered
reasonable. Actuarial penalties, corresponding to the discounted value
of the difference between the residual contractual cash flows of the
loan, and their reinvestment in a loan to a similar counterparty or in
the interbank market for a similar residual maturity are also considered
as reasonable, even when the compensation can be positive or negative
(i.e. \"symmetric\" compensation). An option that permits the issuer or
the holder of a financial instrument to change the interest rate from
floating to fixed rate does not breach the cash flow criterion if the fixed
rate is determined at origination, or if it represents the time value of
money for the residual maturity of the instrument at the date of exercise
of the option. Clauses included in financing granted to encourage the
sustainable development of companies which adjust the interest margin
depending on the achievement of environmental, social or governance
(ESG) objectives and disclosed in chapter 7 of the Universal registration
document, do not call into question the cash flow criterion when such an
adjustment is considered to be minimal. Structured instruments indexed
to ESG market indices do not meet the cash flow criterion.
In the particular case of financial assets contractually linked to payments
received on a portfolio of underlying assets and which include a priority
order for payment of cash flows between investors (\"tranches\"), thereby
creating concentrations of credit risk, a specific analysis is carried out.
The contractual characteristics of the tranche and those of the underlying
financial instrument portfolios must meet the cash flow criterion and the
credit risk exposure of the tranche must be equal to or lower than the
exposure to credit risk of the underlying pool of financial instruments.
Certain loans may be \"non-recourse\", either contractually, or in substance
when they are granted to a special purpose entity. That is in particular
the case of numerous project financing or asset financing loans. The
cash flow criterion is met as long as these loans do not represent a
direct exposure on the assets acting as collateral. In practice, the sole
fact that the financial asset explicitly gives rise to cash flows that are
consistent with payments of principal and interest is not sufficient to
conclude that the instrument meets the cash flow criterion. In that case,
the particular underlying assets to which there is limited recourse shall
be analysed using the \"look-through\" approach. If those assets do not
themselves meet the cash flow criterion, the existing credit enhancement
is assessed. The following aspects are considered: structuring and sizing
of the transaction, own funds level of the structure, expected source
of repayment, price volatility of the underlying assets. This analysis is
applied to \"non-recourse\" loans granted by the Group.
The \"financial assets at amortised cost\" category includes, in particular,
loans granted by the Group, as well as reverse repurchase agreements
and securities held by the Group ALM Treasury in order to collect
contractual flows and meeting the cash flow criterion.
1.f.2 Financialassets at fair value through
Debt instruments are classified at fair value through shareholders' equity
if the following two criteria are met:
\u25a0 business model criterion: financial assets are held in a business model
whose objective is achieved by both holding the financial assets in
order to collect contractual cash flows and selling the financial assets
(\"collect and sale\"). The latter is not incidental but is an integral part
\u25a0 cash flow criterion: the principles are identical to those applicable to
financial assets at amortised cost.
The securities held by the Group ALM Treasury in order to collect
contractual flows or to be sold and meeting the cash flow criterion are
in particular classified in this category.
On initial recognition, financial assets are recognised at their fair value,
including transaction costs directly attributable to the transaction.
They are subsequently measured at fair value and changes in fair value
are recognised, under a specific line of shareholders' equity entitled
\"Changes in assets and liabilities recognised directly in equity that may be
reclassified to profit or loss\". These financial assets are also subject to the
measurement of a loss allowance for expected credit losses on the same
approach as for debt instruments at amortised cost. The counterparty
of the related impact in cost of risk is recognised in the same specific
line of shareholders' equity. On disposal, changes in fair value previously
recognised in shareholders' equity are reclassified to profit or loss.
In addition, interest is recognised in the income statement using the
effective interest method determined at the inception of the contract.
Investments in equity instruments such as shares are classified on option,
and on a case-by-case basis, at fair value through shareholders' equity
(under a specific line). On disposal of the shares, changes in fair value
previously recognised in equity are not recognised in profit or loss. Only
dividends, if they represent remuneration for the investment and not
repayment of capital, are recognised in profit or loss. These instruments
are not subject to impairment.
Investments in mutual funds puttable to the issuer do not meet the
definition of equity instruments. They do not meet the cash flow criterion
either, and thus are recognised at fair value through profit or loss.
1.f.4 Regulatedsavings and loan contracts
Home savings accounts (Comptes \u00c9pargne-Logement \u2013 \"CEL\") and home
savings plans (Plans d'\u00c9pargne Logement \u2013 \"PEL\") are government-
regulated retail products sold in France. They combine a savings phase
and a loan phase which are inseparable, with the loan phase contingent
These products contain two types of obligations for BNP Paribas: an
obligation to pay interest on the savings for an indefinite period, at a
rate set by the government at the inception of the contract (in the case
of PEL products) or at a rate reset every six months using an indexation
formula set by law (in the case of CEL products); and an obligation to lend
to the customer (at the customer's option) an amount contingent upon
the rights acquired during the savings phase, at a rate set at the inception
of the contract (in the case of PEL products) or at a rate contingent upon
the savings phase (in the case of CEL products).
The Group's future obligations with respect to each generation (in the
case of PEL products, a generation comprises all products with the same
interest rate at inception; in the case of CEL products, all such products
constitute a single generation) are measured by discounting potential
future earnings from at-risk outstandings for that generation.
At-risk outstandings are estimated on the basis of a historical analysis
of customer behaviour, and are equivalent to:
\u25a0 for the loan phase: statistically probable loans outstanding and actual
\u25a0 for the savings phase: the difference between statistically probable
outstandings and minimum expected outstandings, with minimum
expected outstandings being deemed equivalent to unconditional term
Earnings for future periods from the savings phase are estimated as the
difference between the reinvestment rate and the fixed savings interest
rate on at-risk savings outstanding for the period in question. Earnings
for future periods from the loan phase are estimated as the difference
between the refinancing rate and the fixed loan interest rate on at-risk
loans outstanding for the period in question.
The reinvestment rate for savings and the refinancing rate for loans
are derived from the swap yield curve and from the spreads expected
on financial instruments of similar type and maturity. Spreads are
determined on the basis of actual spreads on fixed-rate home loans in
the case of the loan phase and products offered to individual clients in
the case of the savings phase. In order to reflect the uncertainty of future
interest rate trends, and the impact of such trends on customer behaviour
models and on at-risk outstandings, the obligations are estimated using
Where the sum of the Group's estimated future obligations with respect
to the savings and loan phases of any generation of contracts indicates a
potentially unfavourable situation for the Group, a provision is recognised
1.f.5 Impairmentof financial assets
measured at amortised cost and debt
instruments measured at fair value
through shareholders' equity
The impairment model for credit risk is based on expected losses.
This model applies to loans and debt instruments measured at amortised
cost or at fair value through equity, to loan commitments and financial
guarantee contracts that are not recognised at fair value, as well as to
lease receivables, trade receivables and contract assets.
The Group identifies three \"stages\" that each correspond to a specific
status with regards to the evolution of counterparty credit risk since the
initial recognition of the asset.
\u25a0 12-month expected credit losses (\"stage 1\"): if at the reporting
date, the credit risk of the financial instrument has not increased
significantly since its initial recognition, this instrument is impaired at
an amount equal to 12-month expected credit losses (resulting from
the risk of default within the next 12 months);
\u25a0 lifetime expected credit losses for non-impaired assets (\"stage 2\"):
the loss allowance is measured at an amount equal to the lifetime
expected credit losses if the credit risk of the financial instrument has
increased significantly since initial recognition but the financial asset
is not considered credit-impaired or doubtful;
\u25a0 lifetime expected credit losses for credit-impaired or doubtful financial
assets (\"stage 3\"): the loss allowance is also measured for an amount
equal to the lifetime expected credit losses.
This general model is applied to all instruments within the scope of IFRS 9
impairment, except for purchased or originated credit-impaired financial
assets and instruments for which a simplified model is used (see below).
The IFRS 9 expected credit loss approach is symmetrical, i.e. if lifetime
expected credit losses have been recognised in a previous reporting
period, and if it is assessed in the current reporting period that there is
no longer any significant increase in credit risk since initial recognition,
the loss allowance reverts to a 12-months expected credit loss.
As regards interest income, under \"stages\" 1 and 2, it is calculated on
the gross carrying amount. Under \"stage 3\", interest income is calculated
on the amortised cost (i.e. the gross carrying amount adjusted for the
The definition of default is aligned with the Basel regulatory default
definition, with a rebuttable presumption that the default occurs no
later than 90 days past due. This definition takes into account the EBA
guidelines of 28 September 2016, notably those regarding the thresholds
applicable for the counting of past-due and probation periods.
The definition of default is used consistently for assessing the increase
in credit risk and measuring expected credit losses.
Credit-impaired or doubtful financial assets
A financial asset is considered credit-impaired or doubtful and classified
in \"stage 3\" when one or more events that have a detrimental impact
on the estimated future cash flows of that financial asset have occurred.
At an individual level, objective evidence that a financial asset is credit-
impaired includes observable data regarding the following events: the
existence of accounts that are more than 90 days past due; knowledge
or indications that the borrower is experiencing significant financial
difficulties, such that a risk can be considered to have arisen regardless
of whether the borrower has missed any payments; concessions with
respect to the credit terms granted to the borrower that the lender would
not have considered had the borrower not been in financial difficulty
(see section Restructuring of financial assets for financial difficulties).
Specific cases of purchased or originated credit-impaired
In some cases, financial assets are credit-impaired at initial recognition.
For these assets, no loss allowance is recorded on initial recognition.
The effective interest rate is calculated taking into account the lifetime
expected credit losses in the initial estimated cash flows. Any change
in lifetime expected credit losses since initial recognition, positive or
negative, is recognised as a loss allowance adjustment in profit or loss.
The simplified approach consists in accounting for a loss allowance
corresponding to lifetime expected credit losses since initial recognition,
and at each reporting date.
The Group applies this model to trade receivables with a maturity shorter
Significant increase in credit risk
A significant increase in credit risk may be assessed on an individual basis
or on a collective basis (by grouping financial instruments according to
common credit risk characteristics), taking into account all reasonable
and supportable information and comparing the risk of default of the
financial instrument at the reporting date with the risk of default of the
financial instrument at the date of initial recognition.
Assessment of deterioration is based on the comparison of the
probabilities of default derived from the ratings on the date of initial
recognition with those existing at the reporting date.
There is also, according to the standard, a rebuttable presumption that
the credit risk of an instrument has significantly increased since initial
recognition when the contractual payments are more than 30 days past
In the consumer credit specialist business, a significant increase in credit
risk is also considered when a past due event has occurred within the
last 12 months, even if it has since been regularised.
The principles applied to assess the significant increase in credit risk are
detailed in note 3.g Cost of risk.
Measurement of expected credit losses
Expected credit losses are defined as an estimate of credit losses (i.e.
the present value of all cash shortfalls) weighted by the probability
of occurrence of these losses over the expected life of the financial
instruments. They are measured on an individual basis, for all exposures.
In practice, for exposures classified in stage 1 and stage 2, expected credit
losses are measured as the product of the probability of default (\"PD\"),
Loss Given Default (\"LGD\") and exposure at default (\"EAD\"), discounted at
the effective interest rate of the exposure (EIR). They result from the risk
of default within the next 12 months (stage 1), or from the risk of default
over the maturity of the facility (stage 2). In the consumer credit specialist
business, because of the specificity of credit exposures, the methodology
used is based on the probability of transition to term forfeiture, and
on discounted loss rates after term forfeiture. These parameters are
measured on a statistical basis for homogeneous populations.
For exposures classified in stage 3, expected credit losses are measured
as the value, discounted at the effective interest rate, of all cash shortfalls
over the life of the financial instrument. Cash shortfalls represent the
difference between the cash flows that are due in accordance with the
contract, and the cash flows that are expected to be received. Where
appropriate, the estimate of expected cash flows takes into account a
cash flow scenario arising from the sale of the defaulted loans or groups
of loans. Proceeds from the sale are recorded net of costs to sell.
The methodology developed is based on existing concepts and
methods (in particular the Basel framework) on exposures for which
capital requirement for credit risk is measured according to the IRBA
methodology. This method is also applied to portfolios for which capital
requirement for credit risk is measured according to the standardised
approach. Besides, the Basel framework has been adjusted in order to
be compliant with IFRS 9 requirements, in particular the use of forward-
All contractual terms of the financial instrument are taken into account,
including prepayment, extension and similar options. In the rare cases
where the expected life of the financial instrument cannot be estimated
reliably, the residual contractual term is used. The standard specifies
that the maximum period to consider when measuring expected credit
losses is the maximum contractual period. However, for revolving credit
cards and overdrafts, in accordance with the exception provided by IFRS 9
for these products, the maturity considered for measuring expected
credit losses is the period over which the entity is exposed to credit
risk, which may extend beyond the contractual maturity (notice period).
For revolving credits and overdrafts to non-retail counterparties, the
contractual maturity can be used, for example if the next review date is
the contractual maturity as they are individually managed.
Probabilities of Default (PD)
Probability of Default is an estimate of the likelihood of default over a
The determination of the PD is based on the Group's internal rating
system, which is described in chapter 5 of the Universal registration
document (section 5.4 Credit risk \u2013 Credit risk management policy). This
section describes how environmental, social and governance (ESG) risks
are taken into account in credit and rating policies, notably with the
introduction of a new tool: the ESG Assessment.
The measurement of expected credit losses requires the estimation of
both 1-year probabilities of default and lifetime probabilities of default.
1-year PDs are derived from long term average regulatory \"through the
cycle\" PDs to reflect the current situation (\"Point in Time\" or \"PIT\").
Lifetime PDs are determined based on the rating migration matrices
reflecting the expected changes in the rating of the exposure until
maturity, and the associated probabilities of default.
Loss Given Default is the difference between contractual cash flows
and expected cash flows, discounted using the effective interest rate
(or an approximation thereof) at the default date. LGD is expressed as a
percentage of the Exposure At Default (EAD).
The estimate of expected cash flows takes into account cash flows
resulting from the sale of collateral held or other credit enhancements
if they are part of the contractual terms and are not accounted for
separately by the entity (for example, a mortgage associated with a
residential loan), net of the costs of obtaining and selling the collateral.
For guaranteed loans, the guarantee is considered as integral to the
loan agreement if it is embedded in the contractual clauses of the
loan, or if it was granted concomitantly to the loan, and if the expected
reimbursement amount can be attached to a loan in particular (i.e.
absence of pooling effect by means of a tranching mechanism, or
the existence of a global cap for a whole portfolio). In such case, the
guarantee is taken into account when measuring the expected credit
losses. Otherwise, it is accounted for as a separate reimbursement asset.
The LGD used for IFRS 9 purposes is derived from the Basel LGD
parameters. It is adjusted for downturn and conservatism margins (in
particular regulatory margins), except for margins for model uncertainties.
Exposure At Default (EAD)
Exposure At Default (EAD) of an instrument is the anticipated outstanding
amount owed by the obligor at the time of default. It is determined by the
expected payment profile taking into account, depending on the product
type: the contractual repayment schedule, expected early repayments
and expected future drawings for revolving facilities.
Forward-looking information
The amount of expected credit losses is measured on the basis of
probability-weighted scenarios, in view of past events, current conditions
and reasonable and supportable economic forecasts.
The principles applied to take into account forward-looking information
when measuring expected credit losses are detailed in note 3.g Cost of
A write-off consists in reducing the gross carrying amount of a financial
asset when there are no longer reasonable expectations of recovering
that financial asset in its entirety or a portion thereof, or when it has
been fully or partially forgiven. The write-off is recorded when all other
means available to the Bank for recovering the receivables or guarantees
have failed, and also generally depends on the context specific to each
If the amount of loss on write-off is greater than the accumulated loss
allowance, the difference is recognised as an additional impairment loss
in \"Cost of risk\". For any recovery once the financial asset (or part thereof)
is no longer recognised on the balance sheet, the amount received is
recorded as a gain in \"Cost of risk\".
Recoveries through the repossession
When a loan is secured by a financial or a non-financial asset serving as
a guarantee and the counterparty is in default, the Group may decide to
exercise the guarantee and, depending on the jurisdiction, it may then
become owner of the asset. In such a situation, the loan is written-off
against the asset received as collateral.
Once ownership of the asset is effective, it is recognised at fair value and
classified according to the intent of use.
Restructuring of financial assets for financial
A restructuring due to the borrower's financial difficulties is defined as
a change in the terms and conditions of the initial transaction that the
Group is considering only for economic or legal reasons related to the
borrower's financial difficulties.
For restructurings not resulting in derecognition of the financial asset, the
restructured asset's gross carrying amount is reduced to the discounted
amount, using the original effective interest rate of the asset, of the new
expected future flows. The change in the gross carrying amount of the
asset is recorded in the income statement in \"Cost of risk\".
The existence of a significant increase in credit risk for the financial
instrument is then assessed by comparing the risk of default after the
restructuring (under the revised contractual terms) and the risk of default
at the initial recognition date (under the original contractual terms). In
order to demonstrate that the criteria for recognising lifetime expected
credit losses are no longer met, good payment behaviour will have to be
observed over a certain period of time.
When the restructuring consists of a partial or total exchange against
other substantially different assets (for example, the exchange of a debt
instrument against an equity instrument), it results in the extinction of
the original asset and the recognition of the assets remitted in exchange,
measured at their fair value at the date of exchange. The difference in
value is recorded in the income statement in \"Cost of risk\".
Modifications to financial assets that are not due to a borrower's financial
difficulties, or granted in the context of a moratorium (i.e. commercial
renegotiations) are generally analysed as the early repayment of the
former loan, which is then derecognised, followed by the set-up of a new
loan at market conditions. If there is no significant repayment penalty,
they consist in resetting the interest rate of the loan at market conditions,
with the client being in a position to change lender and not encountering
any financial difficulties.
The Group applies observation periods to assess the possible return to
a better stage. Accordingly, a 3-month probation period is observed for
the transition from stage 3 to stage 2 which is extended to 12 months
in the event of restructuring due to financial difficulties.
For the transition from stage 2 to stage 1, a probation period of two
years is observed for loans that have been restructured due to financial
Cost of risk includes the following items of profit or loss:
\u25a0 impairment gains and losses resulting from the accounting of loss
allowances for 12-month expected credit losses and lifetime expected
credit losses (\"stage 1\" and \"stage 2\") relating to debt instruments
measured at amortised cost or at fair value through shareholders'
equity, loan commitments and financial guarantee contracts that are
not recognised at fair value as well as lease receivables, contract
assets and trade receivables;
\u25a0 impairment gains and losses resulting from the accounting of loss
allowances relating to financial assets (including those at fair
value through profit or loss) for which there is objective evidence of
impairment (\"stage 3\"), write-offs on irrecoverable loans and amounts
recovered on loans written-off.
It also includes expenses relating to fraud and to disputes inherent to
1.f.7 Financialinstruments at fair value
Trading portfolio and other financial assets
measured at fair value through profit or loss
The trading portfolio includes instruments held for trading (trading
transactions), including derivatives.
Other financial assets measured at fair value through profit or loss
include debt instruments that do not meet the \"collect\" or \"collect
and sale\" business model criterion or that do not meet the cash flow
criterion, as well as equity instruments for which the fair value through
shareholders' equity option has not been retained. Finally financial assets
may be designated as at fair value through profit or loss if this enables the
entity to eliminate or significantly reduce a mismatch in the measurement
and accounting treatment of assets and liabilities that would otherwise
arise if they were to be classified in separate categories.
All those financial instruments are measured at fair value at initial
recognition, with transaction costs directly posted in profit or loss. At the
reporting date, they are measured at fair value, with changes presented
in \"Net gain/loss on financial instruments at fair value through profit
or loss\". Income, dividends, and realised gains and losses on disposal
related to held-for-trading transactions are accounted for in the same
Debt securities and subordinated debt
Debt securities and subordinated debt are measured at amortised cost
unless they are recognised at fair value through profit or loss.
Debt securities are initially recognised at the issue value including
transaction costs and are subsequently measured at amortised cost
using the effective interest method.
Issued bonds redeemable or convertible into own equity may contain
a debt component and an equity component, determined upon initial
recognition of the transaction. In this case, they will be qualified as
compound financial instruments.
In this respect, the Group has elected to record contingent convertible
bonds issued, without maturity, when convertible into a variable number
of own shares on the occurrence of a predetermined trigger event (e.g.
a decrease in the solvency ratio below a threshold), as compound
instruments, to the extent that the coupons on these bonds are paid
The term \"own equity instruments\" refers to shares issued by the parent
company (BNP Paribas SA) and by its fully consolidated subsidiaries.
External costs that are directly attributable to an issue of new shares
are deducted from equity net of all related taxes.
Own equity instruments held by the Group, also known as treasury
shares, are deducted from consolidated shareholders' equity irrespective
of the purpose for which they are held. Gains and losses arising on such
instruments are eliminated from the consolidated profit and loss account.
When the Group acquires equity instruments issued by subsidiaries
under the exclusive control of BNP Paribas, the difference between the
acquisition price and the share of net assets acquired is recorded in
retained earnings attributable to BNP Paribas shareholders. Similarly, the
liability corresponding to put options granted to minority shareholders
in such subsidiaries, and changes in the value of that liability, are offset
against minority interests, with any surplus offset against retained
earnings attributable to BNP Paribas shareholders. Until these options
have been exercised, the portion of net income attributable to minority
interests is allocated to minority interests in the profit and loss account.
A decrease in the Group's interest in a fully consolidated subsidiary is
recognised in the Group's accounts as a change in shareholders' equity.
Financial instruments issued by the Group and classified as equity
instruments (e.g. undated super subordinated notes) are presented in
the balance sheet in \"Capital and retained earnings\".
Distributions from a financial instrument classified as an equity
instrument are recognised directly as a deduction from equity. Similarly,
the transaction costs of an instrument classified as equity are recognised
as a deduction from shareholders' equity.
Own equity instrument derivatives are treated as follows, depending on
the method of settlement:
\u25a0 as equity instruments if they are settled by physical delivery of a fixed
number of own equity instruments for a fixed amount of cash or other
financial asset. Such instruments are not revalued;
\u25a0 as derivatives if they are settled in cash or by choice by physical
delivery of the shares or in cash. Changes in value of such instruments
are taken to the profit and loss account.
If the contract includes an obligation, whether contingent or not, for the
bank to repurchase its own shares, the bank recognises the debt at its
present value with an offsetting entry in shareholders' equity.
Cash flow hedges are particularly used to hedge interest rate risk on
floating-rate assets and liabilities, including rollovers, and foreign
exchange risks on highly probable forecast foreign currency revenues.
At the inception of the hedge, the Group prepares formal documentation
which details the hedging relationship, identifying the instrument, or
portion of the instrument, or portion of risk that is being hedged, the
hedging strategy and the type of risk hedged, the hedging instrument, and
the methods used to assess the effectiveness of the hedging relationship.
On inception and at least quarterly, the Group assesses, in consistency
with the original documentation, the actual (retrospective) and expected
(prospective) effectiveness of the hedging relationship. Retrospective
effectiveness tests are designed to assess whether the ratio of actual
changes in the fair value or cash flows of the hedging instrument to
those in the hedged item is within a range of 80% to 125%. Prospective
effectiveness tests are designed to ensure that expected changes in the
fair value or cash flows of the derivative over the residual life of the hedge
adequately offset those of the hedged item. For highly probable forecast
transactions, effectiveness is assessed largely on the basis of historical
data for similar transactions.
Under IAS 39 as adopted by the European Union, which excludes certain
provisions on portfolio hedging, interest rate risk hedging relationships
based on portfolios of assets or liabilities qualify for fair value hedge
\u25a0 the risk designated as being hedged is the interest rate risk associated
with the interbank rate component of interest rates on commercial
banking transactions (loans to customers, savings accounts and
\u25a0 the instruments designated as being hedged correspond, for each
maturity band, to a portion of the interest rate gap associated with
\u25a0 the hedging instruments used consist exclusively of \"plain vanilla\"
\u25a0 prospective hedge effectiveness is established by the fact that all
derivatives must, on inception, have the effect of reducing interest
rate risk in the portfolio of hedged underlying. Retrospectively, a hedge
will be disqualified from hedge accounting once a shortfall arises in the
underlying specifically associated with that hedge for each maturity
band (due to prepayment of loans or withdrawals of deposits).
The accounting treatment of derivatives and hedged items depends on
In a fair value hedging relationship, the derivative instrument is
remeasured at fair value in the balance sheet, with changes in fair value
recognised in profit or loss in \"Net gain/loss on financial instruments at
fair value through profit or loss\", symmetrically with the remeasurement
of the hedged item to reflect the hedged risk. In the balance sheet, the
fair value remeasurement of the hedged component is recognised in
accordance with the classification of the hedged item in the case of
a hedge of identified assets and liabilities, or under \"Remeasurement
adjustment on interest rate risk hedged portfolios\" in the case of a
portfolio hedging relationship.
If a hedging relationship ceases or no longer fulfils the effectiveness
criteria, the hedging instrument is transferred to the trading book and
accounted for using the treatment applied to this category. In the case
of identified fixed-income instruments, the remeasurement adjustment
recognised in the balance sheet is amortised at the effective interest
rate over the remaining life of the instrument. In the case of interest
rate risk hedged fixed-income portfolios, the adjustment is amortised
on a straight-line basis over the remainder of the original term of the
hedge. If the hedged item no longer appears in the balance sheet, in
particular due to prepayments, the adjustment is taken to the profit and
loss account immediately.
In a cash flow hedging relationship, the derivative is measured at
fair value in the balance sheet, with changes in fair value taken to
shareholders' equity on a separate line, \"Changes in fair value recognised
directly in equity\". The amounts taken to shareholders' equity over the
life of the hedge are transferred to the profit and loss account under
\"Net interest income\" as and when the cash flows from the hedged item
impact profit or loss. The hedged items continue to be accounted for using
the treatment specific to the category to which they belong.
If the hedging relationship ceases or no longer fulfils the effectiveness
criteria, the cumulative amounts recognised in shareholders' equity as
a result of the remeasurement of the hedging instrument remain in
equity until the hedged transaction itself impacts profit or loss, or until
it becomes clear that the transaction will not occur, at which point they
are transferred to the profit and loss account.
If the hedged item ceases to exist, the cumulative amounts recognised in
shareholders' equity are immediately taken to the profit and loss account.
Whatever the hedging strategy used, any ineffective portion of the hedge
is recognised in the profit and loss account under \"Net gain/loss on
financial instruments at fair value through profit or loss\".
Hedges of net foreign currency investments in subsidiaries and branches
are accounted for in the same way as cash flow hedges. Hedging
instruments may be foreign exchange derivatives or any other non-
derivative financial instrument.
The unit of measurement is the individual financial asset or financial
liability but a portfolio-based measurement can be elected, subject to
certain conditions. Accordingly, the Group retains this portfolio-based
measurement exception to determine the fair value when some group
of financial assets and financial liabilities and other contracts within the
scope of the standard relating to financial instruments with substantially
similar and offsetting market risks or credit risks is managed on the basis
of a net exposure, in accordance with the documented risk management
Assets and liabilities measured or disclosed at fair value are categorised
into the three following levels of the fair value hierarchy:
\u25a0 Level 1: fair values are determined using directly quoted prices in
active markets for identical assets and liabilities. Characteristics of
an active market include the existence of a sufficient frequency and
volume of activity and of readily available prices;
\u25a0 Level 2: fair values are determined based on valuation techniques for
which significant inputs are observable market data, either directly
or indirectly. These techniques are regularly calibrated and the inputs
are corroborated with information from active markets;
\u25a0 Level 3: fair values are determined using valuation techniques for
which significant inputs are unobservable or cannot be corroborated
by market-based observations, due for instance to illiquidity of the
instrument and significant model risk. An unobservable input is a
parameter for which there are no market data available and that
is therefore derived from proprietary assumptions about what other
market participants would consider when assessing fair value. The
assessment of whether a product is illiquid or subject to significant
model risks is a matter of judgment.
The level in the fair value hierarchy within which the asset or liability
is categorised in its entirety is based upon the lowest level input that is
significant to the entire fair value.
For financial instruments disclosed in Level 3 of the fair value hierarchy,
and marginally some instruments disclosed in Level 2, a difference
between the transaction price and the fair value may arise at initial
recognition. This \"Day One Profit\" is deferred and released to the profit
and loss account over the period during which the valuation parameters
are expected to remain non-observable. When parameters that were
originally non-observable become observable, or when the valuation can
be substantiated in comparison with recent similar transactions in an
active market, the unrecognised portion of the day one profit is released
to the profit and loss account.
Repurchase agreements and securities lending/
Securities temporarily sold under repurchase agreements continue to
be recognised in the Group's balance sheet in the category of securities
to which they belong. The corresponding liability is recognised at
amortised cost under the appropriate \"Financial liabilities at amortised
cost\" category on the balance sheet, except in the case of repurchase
agreements contracted for trading purposes, for which the corresponding
liability is recognised in \"Financial liabilities at fair value through profit
Securities temporarily acquired under reverse repurchase agreements are
not recognised in the Group's balance sheet. The corresponding receivable
is recognised at amortised cost under the appropriate \"Financial assets
at amortised cost\" category in the balance sheet, except in the case
of reverse repurchase agreements contracted for trading purposes, for
which the corresponding receivable is recognised in \"Financial assets at
fair value through profit or loss\".
Securities lending transactions do not result in derecognition of the
lent securities, and securities borrowing transactions do not result in
recognition of the borrowed securities on the balance sheet. In cases
where the borrowed securities are subsequently sold by the Group, the
obligation to deliver the borrowed securities on maturity is recognised
on the balance sheet under \"Financial liabilities at fair value through
3.c NET GAIN ON FINANCIAL INSTRUMENTS
AT FAIR VALUE THROUGH PROFIT
Net gain on financial instruments measured at fair value through profit
or loss includes all profit and loss items relating to financial instruments
held for trading, financial instruments that the Group has designated as
at fair value through profit or loss, non-trading equity instruments that
the Group did not choose to measure at fair value through equity, as
well as debt instruments whose cash flows are not solely repayments
of principal and interest on the principal or whose business model is
not to collect cash flows nor to collect cash flows and sell the assets.
These income items include dividends on these instruments and exclude
interest income and expense from financial instruments designated as
at fair value through profit or loss and instruments whose cash flows
are not only repayments of principal and interest on the principal or
whose business model is not to collect cash flows nor to collect cash
flows and sell the assets, which are presented in \"Net interest income\"
Financial instruments held for trading
Interest rate and credit instruments
Equity financial instruments
Foreign exchange financial instruments
Loans and repurchase agreements
Other financial instruments
Financial instruments designated as at fair value through profit or loss
Other financial instruments at fair value through profit or loss
Impact of hedge accounting
Fair value hedging derivatives
Hedged items in fair value hedge
NET GAIN ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
The general model for impairment described in note 1.f.5 used by the
Group relies on the following two steps:
\u25a0 assessing whether there has been a significant increase in credit risk
since initial recognition; and
\u25a0 measuring impairment allowance as either 12-month expected credit
losses or lifetime expected credit loss (i.e. loss expected at maturity).
Both steps rely on forward-looking information.
Significant increase in credit risk
At 31 December 2022, BNP Paribas revised its criteria for assessing the
significant increase in credit risk in line with the recommendations issued
by the European Banking Authority and the European Central Bank.
Previously, except for the consumer credit specialist business, the credit
risk deterioration was mainly evaluated based on changes in the internal
credit rating, an indicator of the average 1-year probability of default
through the cycle. In order to fully consider forward-looking information,
the new criteria use the probability of default to maturity, which is derived
from the internal rating, incorporating the expected consequences of
changes in macroeconomic scenarios, as the main indicator.
Under these new criteria, credit risk is assumed to have significantly
increased, and the asset is classified in stage 2, if the probability of
default to maturity of the instrument has increased at least threefold
since its origination. This relative variation criterion is supplemented
by an absolute variation criterion of the default probability of 400 basis
Furthermore, for all portfolios (except for the consumer credit specialist
\u25a0 the facility is assumed to be in stage 1 when its 1-year \"Point in Time\"
probability of default (PiT PD) is below 0.3% at the reporting date, since
changes in probability of default due to credit downgrades in this zone
are not material, and therefore not considered \"significant\";
\u25a0 when the 1-year PiT PD is greater than 20% at the reporting date, given
the Group's credit issuance practices, the deterioration is considered
significant, and the facility is classified in stage 2 (as long as the facility
In the consumer credit specialist business, the existence of a payment
incident during the last 12 months, potentially regularised, is considered
to be an indication of significant increase in credit risk and the facility is
therefore classified in stage 2.
The table below shows a comparison between the previous and the new criteria for assessing the significant increase in credit risk:
One year probability of default* < 0.25%
* Probability of default through the cycle.
** \"Point in Time\" (PiT) probability of default including forward-looking.
One year PiT probability of default** < 0.3%
Deterioration from origination leading
Rating downgrade \u2265 6 notches
Rating downgrade \u2265 3 notches
One year probability of default > 10%
One year PiT probability of default> 20%
One year probability of default
One year probability of default at origination
Rating downgrade \u2265 6 notches
Lifetime PiT probability of default
Lifetime PiT probability of default at origination
Variation of lifetime PiT probability of default
since origination > 400 bps
Credit risk is assumed to have increased significantly since initial
recognition and the asset is classified in stage 2 in the event of late
payment of more than 30 days or restructuring due to financial difficulties
(as long as the facility is not credit-impaired). Since 31 December 2023,
performing corporate clients placed under credit watch are systematically
In the first half of 2022, the internal ratings of the Russian counterparties
(including the sovereign rating) were systematically downgraded to
take into account recent events, thus leading to the transfer of their
outstandings to stage 2. However, given the Group's limited level of
exposure to this country, this deterioration had no significant effect on
Forward-Looking Information
The Group considers forward-looking information both when assessing
significant increase in credit risk and when measuring Expected Credit
Regarding the measurement of expected credit losses, the Group has
chosen to use 4 macroeconomic scenarios by geographic area covering
a wide range of potential future economic conditions:
\u25a0 a baseline scenario, consistent with the scenario used for budgeting;
\u25a0 a favourable scenario, capturing situations where the economy
performs better than anticipated;
\u25a0 an adverse scenario, corresponding to the scenario used for the
Group's quarterly stress tests;
\u25a0 a severe scenario corresponding to a shock of magnitude greater than
that of the adverse scenario.
The link between the macroeconomic scenarios and the ECL measurement
is mainly achieved through a modelling of the probabilities of default
and deformation of migration matrices based on internal rating (or risk
parameter). The probabilities of default determined according to these
scenarios are used to measure expected credit losses in each of these
The Group's setup is broken down by sector to take into account the
heterogeneity of sectoral dynamics when assessing the probability of
Forward-looking information is also considered when determining the
significant deterioration in credit risk. As a matter of fact, the probabilities
of default used as the basis for this assessment include forward-looking
multi-scenario information in the same way as for the calculation of the
The weight to be attributed to the expected credit losses calculated in
each of the scenarios is defined as 50% for the baseline scenario, and:
\u25a0 the weight of the three alternative scenarios is defined according to
the position in the credit cycle. In this approach, the adverse scenario
carries more weight in situations at the upper end of the cycle than
those at the lower end of the cycle, in anticipation of a potential
\u25a0 the weight of the favourable scenario is at least 10% and at most 40%;
\u25a0 the total weight of adverse scenarios fluctuates symmetrically with the
favourable also within a range of 10% to 40%; with a severe component
representing 20% of this weight with a minimum weight of 5%.
When appropriate, the ECL measurement can take into account asset
The four macroeconomic scenarios are defined over a three-year
projection horizon. They correspond to:
\u25a0 a baseline scenario, which describes the most likely path of the
economy over the projection horizon. This scenario is updated on
a quarterly basis and is prepared by the Group Economic Research
Department in collaboration with various experts within the Group.
Projections are designed for each key market of the Group (France,
Italy, Belgium, the United States, and the Eurozone) using key
macroeconomic variables (Gross Domestic Product - GDP - and its
components, unemployment rate, consumer prices, interest rates,
foreign exchange rates, oil prices, real estate prices, etc.) which are key
drivers for modeling risk parameters used in the stress test process;
\u25a0 an adverse scenario, which describes the impact of the materialisation
of some of the risks weighing on the baseline scenario, resulting in a
much less favourable economic path than in the baseline scenario.
The GDP shock is applied with varying magnitudes, but simultaneously,
to the economies under consideration. Generally, these assumptions
are broadly consistent with those proposed by the regulators. The
calibration of shocks on other variables (e.g. unemployment, consumer
prices, interest rates, etc.) is based on models and expert judgment;
\u25a0 a severely adverse scenario, which is an aggravated version of the
\u25a0 a favourable scenario, which reflects the impact of the materialisation
of some of the upside risks for the economy, resulting in a more
favourable economic path. The favourable shock on GDP is deducted
from the structural adverse shock on GDP in such a way that the
probabilities of the two shocks are equal on average over the cycle.
Other variables (e.g. unemployment, inflation, interest rates, etc.) are
defined in the same way as in the adverse scenario.
The link between the macroeconomic scenarios and the measurement of
the ECL is complemented by an approach allowing to take into account
anticipation aspects not captured by the models in the generic approach.
This is particularly the case when unprecedented events in the historical
chronicle taken into account to build the models occur or are anticipated,
or when the nature or amplitude of change in macroeconomic parameter
calls into question past correlations. Thus, the situation of high inflation
and the current and projected level of interest rates correspond to aspects
not observed in the reference history. In this context, the Group has
developed an approach to take into account the future economic outlook
when assessing the financial strength of counterparties. This approach
involves projecting the impact of higher interest rates on customers'
financial ratios, notably considering their level of indebtedness. Credit
ratings and associated probabilities of default are revalued based on
these simulated financial ratios. This approach is also used to anticipate
the effect of lower prices of commercial properties.
Global activity decelerated in 2023, in a context of tight financial
conditions and still high inflation. Global GDP is expected to grow
by 2.8% on annual average (compared with 3.3% in 2022), mainly
reflecting weaker developments among European economies. In the
Eurozone, activity growth is expected to have decelerated to 0.5% in
2023 (while, at 30 June 2023, it was expected to reach 0.7%), reflecting
much less dynamic domestic demand (both in terms of consumption and
investment). The US economy has proved more resilient than initially
anticipated and is assumed to grow by 2.3% in 2023 (while, at 30 June
2023, it was expected to grow by only 0.9%). In 2024, economic conditions
are expected to be sluggish among advanced economies, with growth
rates slightly below 1% in both the Eurozone and the US.
While inflation has receded at a quite rapid pace in the course of 2023, it
has remained significantly above central bank targets in many countries.
This high inflation environment has pushed central banks to implement
the most pronounced monetary tightening in recent decades.
The main central banks (European Central Bank, US Federal Reserve) may
have completed their monetary policy tightening cycle by the end of 2023.
They are expected to keep their monetary stance broadly unchanged for a
few months. Both short-term and long-term interest rates have reached
levels not seen since the years 2000 and are expected to remain relatively
high for some time. Tight financial conditions should thus continue to
weigh on activity in 2024.
Adverse and severely adverse scenarios
The adverse and severely adverse scenarios are based on the assumption
that certain downside risks will materialise, resulting in much less
favourable economic paths than in the baseline scenario.
The following main risks are identified:
\u25a0 Geopolitical risks and globalisation developments. Geopolitical risks
have increased significantly in recent years, contributing to a fracturing
of the global economy. Geopolitical tensions can weigh on the global
economy through various channels, including shocks on commodity
prices, financial markets, business confidence, supply chains and
trade. Such developments are susceptible to lead simultaneously to
higher inflation developments and weaker activity, complicating the
task of central banks. The growing use of international sanctions also
increases the possible magnitude of consequences of such events;
\u25a0 A greater impact of tight monetary conditions. The marked tightening
of monetary policy in response to high inflation over past quarters
has led to much higher short-term and long-term interest rates
than in previous years. This has already weighed on activity, notably
through weaker developments in most interest rate sensitive sectors,
in particular the real estate sector. These negative consequences
could extend further given the usual delays between the increase in
rates and its effect on the economy. In a more unfavourable economic
context, tighter financial conditions, combined with weaker activity
developments could lead to weaker trends (than assumed in the
baseline scenario) regarding credit, investment, residential and
commercial real estate prices, and lead to higher default rates;
\u25a0 More fragile public finances. The fact that debt-to-GDP ratios are high
increases risks related to public finances in an environment of high
interest rates and weak growth. These combined developments could
give birth in some countries to market tensions (widening sovereign
bond spreads) and affect activity through several channels (higher
interest rates, reduced government spending, higher taxes).
The adverse and severe scenarios assume the materialisation of these
identified latent risks from the first quarter of 2024.
While downside risks are shared by the adverse and the severely adverse
scenarios, the impacts are assumed to be markedly higher in the severely
adverse scenario, due to both more pronounced direct shocks (e.g. higher
commodity prices) and the development of a negative spiral between key
driving factors (e.g. activity, public debt, bond yields, equity markets).
Among the considered countries, GDP levels in the adverse scenario stand
between 7.8% and 11.1% lower than in the baseline scenario at the end
of the shock period. In particular, this deviation reaches 9% on average
in both the Eurozone and the United States.
In the severe scenario, GDP levels stand between 11.6% and 16.2% lower
than in the baseline scenario at the end of the shock period. This deviation
reaches 13.2% in both the Eurozone and the United States.
Scenario weighting and cost of risk sensitivity
At 31 December 2023, the weight of the favourable scenario considered
by the Group was 33%, and 12% for the adverse scenario and 5% for
the severe scenario. At 31 December 2022, the weight of the favourable
scenario was 34% and 16% for the adverse scenario (the severe scenario
was introduced in the first half 2023).
The sensitivity of the amount of expected credit losses for all financial
assets at amortised cost or at fair value through equity and credit
commitments is assessed by comparing the estimated expected credit
losses resulting from the weighting of the above scenarios with that
resulting from each of the two alternative scenarios:
\u25a0 an increase in ECL of 23%, or EUR 1,150 million according to the
adverse scenario (22% at 31 December 2022);
\u25a0 a decrease in ECL of 12%, or EUR 600 million according to the
favourable scenario (7% at 31 December 2022).
Post-model adjustments are made when system limitations are
identified in a particular context, for instance, in the case of insufficient
statistical data to reflect the specific situation in the models. Post-model
adjustments are also considered to take into account, where applicable,
the consequences of climatic events on expected credit losses.
\u25a0 Adaptation of the ECL assessment process to factor in the specific
nature of the health crisis:
Conservative adjustments were taken into account when the models
used were based on indicators that show unusual levels in the context
of the health crisis and the support programmes, such as the increase
in deposits and the decrease in past due events for retail customers
For the consumer credit specialist business, a conservative adjustment
had been considered in 2020 for loans that benefitted from a
moratorium. In 2021, this adjustment was reversed in connection with
the satisfactory return to payment observed on these loans. However,
a conservative adjustment was made to compensate for the atypical
These post-model adjustments were reversed in 2022.
\u25a0 Adaptation of the ECL assessment process to factor in the significant
rise in inflation and in interest rates:
Additional adjustments were made in 2022 to take into account the
effects of inflation and interest rate hikes when this effect is not
directly estimated by the models. For example, within the consumer
credit specialist business, adjustments were considered for the
categories of customers most sensitive to the gradual decline in the
level of their net income.
Part of these adjustments were integrated into the models in 2022
and in the first half of 2023, leading to a decrease in the post-model
All of these adjustments represent 4.5% of the total amount of expected
credit losses at 31 December 2023, compared to 6.1% at 31 December 2022.
In 2023, the volume of financial assets at amortised cost was stable
compared to previous year and amounted to EUR 1,022 billion (see
note 5.e Financial assets at amortised cost) of which EUR 877 billion in
loans and advances to customers.
Loans and advances to customers classified in stage 1 increased by
EUR 15 billion over the year, while stage 2 outstandings decreased by
EUR 14 billion. This evolution mainly reflects a deterioration in activity
during the first half of 2023 that was less pronounced than in the forecasts
made for the 31 December 2022 closing. This situation is reflected both
in the consequences of the change in the GDP scenarios, and in the
effects of the interest rate increase projections on customers' financial
ratios, thus leading to the return to stage 1 of outstandings previously
transferred to stage 2 and to provision reversals without stage transfer.
The systematic classification into stage 2, for the corporate category, of
performing clients under credit watch as of 31 December 2023 led to
limited transfers of outstandings from stage 1 to stage 2.
Besides, in relation to the deterioration in activity, transfers to stage 3
for EUR 8.6 billion were higher than in 2022, particularly for corporate
clients (see note 5.f Impaired financial assets).
These combined effects led to a net reversal of impairment on stage 1
and 2 in 2023. The provisioning ratio for loans and advances to customers
classified in stage 2 remained stable at 3.2% at 31 December 2023.
Changes in impairment of financial assets at amortised cost during the previous period
Net allowance to impairment
Financial assets purchased or originated during the
Financial assets derecognised during the period(1)
Change in the significant increase in credit risk
Other allowances/reversals without stage transfer(2)
Impairment provisions used
Changes in exchange rates
Changes in scope of consolidation and other items
At 31 December 2022 restated according to IFRS 17 and 9
(2) Includingamortisation.
Interest rate risk and foreign exchange risk management strategies are described in chapter 5 \u2013 Pillar 3 of the Universal registration document
(section 5.7 \u2013 Market risk \u2013 Market risk related to banking activities). Quantitative information related to foreign currency borrowings used for net
investment hedges is also mentioned in this chapter.
The table below presents the detail of fair value hedge relationships for identified financial instruments and portfolios of financial instruments that
are continuing at 31 December 2023:
amounts fairvalue fairvalue
Fair value hedges of identified
Interest rate derivatives hedging
the interest rate risk related to
Foreign exchange derivatives
hedging the interest rate and
foreign exchange risks related to
Interest rate risk hedged
Interest rate derivatives hedging
the interest rate risk related to(1)
Foreign exchange derivatives
hedging the interest rate and
foreign exchange risks related to
(1) Areincluded in this section the notional amounts of hedging derivatives and of swaps that reverse the interest rate positions, thus reducing the hedge
relationship, when the hedged item still exists, for respectively EUR 93,839 million for derivatives hedging loans and receivables and EUR 177,833 million
for derivatives hedging deposits.
The table below presents the detail of fair value hedge relationships for identified financial instruments and portfolios of financial instruments that
are continuing at 31 December 2022:
restated according to IFRS 17 and 9
amounts fairvalue fairvalue
Fair value hedges of identified
Interest rate derivatives hedging
the interest rate risk related to
Foreign exchange derivatives
hedging the interest rate and
foreign exchange risks related to
Interest rate risk hedged
Interest rate derivatives hedging
the interest rate risk related to(1)
Foreign exchange derivatives
hedging the interest rate and
foreign exchange risks related to
(1) Areincluded in this section the notional amounts of hedging derivatives and of swaps that reverse the interest rate positions, thus reducing the hedge
relationship, when the hedged item still exists, for respectively EUR 121,183 million for derivatives hedging loans and receivables and EUR 103,261 million
for derivatives hedging deposits.
An asset or a liability or set of assets and liabilities, can be hedged over
several periods of time with different derivative financial instruments.
Besides, some hedges are achieved by the combination of two derivative
instruments. In this case, the notional amounts add up and their total
amount is higher than the hedged amount. The first situation is observed
more particularly for interest rate risk hedged portfolios and the second
for hedges of issued debt securities.
As regards discontinued fair value hedge relationships where the
derivative contract was terminated, the cumulated amount of
revaluation remaining to be amortised over the residual life of the hedged
instruments amounts to EUR 1,143 million in assets at 31 December
2023, and to -EUR 166 million in liabilities, for hedges of portfolios
of financial instruments. At 31 December 2022, these amounts were
EUR 1,399 million in assets and -EUR 138 million in liabilities.
Regarding hedges of identified instruments, the cumulated amount of
revaluation remaining to be amortised over the residual life of the hedged
instruments amounts to EUR 105 million in assets at 31 December 2023.
At 31 December 2022, this amount was EUR 111 million in assets.
The notional amount of cash flow hedge derivatives is EUR 241,125 million
at 31 December 2023. Changes in assets and liabilities recognised directly
in equity amount to EUR 189 million. At 31 December 2022, the notional
amount of cash flow hedge derivatives was EUR 213,866 million and
changes in assets and liabilities recognised directly in equity amounted
5.d MEASUREMENT OF THE FAIR VALUE
BNP Paribas has retained the fundamental principle that it should have
a unique and integrated processing chain for producing and controlling
the valuations of financial instruments that are used for the purpose of
daily risk management and financial reporting. All these processes are
based on a common economic valuation which is a core component of
business decisions and risk management strategies.
Economic value is composed of mid-market value, to which valuation
Mid-market value is derived from external data or valuation techniques
that maximise the use of observable and market-based data. Mid-market
value is a theoretical additive value which does not take account of i)
the direction of the transaction or its impact on the existing risks in the
portfolio, ii) the nature of the counterparties, and iii) the aversion of a
market participant to particular risks inherent in the instrument, the
market in which it is traded, or the risk management strategy.
Valuation adjustments take into account valuation uncertainty and
include market and credit risk premiums to reflect costs that could be
incurred in case of an exit transaction in the principal market.
Fair value generally equals the economic value, subject to limited
adjustments, such as own credit adjustments, which are specifically
required by IFRS standards.
The main valuation adjustments are presented in the section below.
Valuation adjustments retained by BNP Paribas for determining fair
Bid/offer adjustments: the bid/offer range reflects the additional exit cost
for a price taker and symmetrically the compensation sought by dealers
to bear the risk of holding the position or closing it out by accepting
BNP Paribas assumes that the best estimate of an exit price is the bid
or offer price, unless there is evidence that another point in the bid/offer
range would provide a more representative exit price.
Input uncertainty adjustments: when the observation of prices or
data inputs required by valuation techniques is difficult or irregular, an
uncertainty exists on the exit price. There are several ways to gauge the
degree of uncertainty on the exit price such as measuring the dispersion
of the available price indications or estimating the possible ranges of the
inputs to a valuation technique.
Model uncertainty adjustments: these relate to situations where
valuation uncertainty is due to the valuation technique used, even
though observable inputs might be available. This situation arises when
the risks inherent in the instruments are different from those available
in the observable data, and therefore the valuation technique involves
assumptions that cannot be easily corroborated.
Future Hedging Costs adjustments (FHC): this adjustment applies to
positions that require dynamic hedging throughout their lifetime leading
to additional bid/offer costs. Calculation methods capture these expected
costs in particular based on the optimal hedging frequency.
Credit valuation adjustment (CVA): the CVA adjustment applies to
valuations and market quotations whereby the credit worthiness of the
counterparty is not reflected. It aims to account for the possibility that
the counterparty may default and that BNP Paribas may not receive the
full fair value of the transactions.
In determining the cost of exiting or transferring counterparty risk
exposures, the relevant market is deemed to be an inter-dealer market.
However, the determination of CVA remains judgemental due to i) the
possible absence or lack of price discovery in the inter-dealer market, ii)
the influence of the regulatory landscape relating to counterparty risk
on the market participants' pricing behaviour and iii) the absence of a
dominant business model for managing counterparty risk.
The CVA model is grounded on the same exposures as those used for
regulatory purposes. The model attempts to estimate the cost of an
optimal risk management strategy based on i) implicit incentives and
constraints inherent in the regulations in force and their evolutions, ii)
market perception of the probability of default, and iii) default parameters
used for regulatory purposes.
Funding valuation adjustment (FVA): when valuation techniques are used
for the purpose of deriving fair value, funding assumptions related to
the future expected cash flows are an integral part of the mid-market
valuation, notably through the use of appropriate discount rates. These
assumptions reflect what the Bank anticipates as being the effective
funding conditions of the instrument that a market participant would
consider. This notably takes into account the existence and terms of any
collateral agreement. In particular, for non- or imperfectly collateralised
derivative instruments, they include an explicit adjustment to the
Own-credit valuation adjustment for debts (OCA) and for derivatives
(debit valuation adjustment - DVA): OCA and DVA are adjustments
reflecting the effect of credit worthiness of BNP Paribas, on respectively
the value of debt securities designated as at fair value through profit
or loss and derivatives. Both adjustments are based on the expected
future liability profiles of such instruments. The own credit worthiness is
inferred from the market-based observation of the relevant bond issuance
levels. The DVA adjustment is determined after taking into account the
Funding Valuation Adjustment (FVA).
Interest rate derivatives
Foreign exchange derivatives
DERIVATIVE FINANCIAL INSTRUMENTS
NOT USED FOR HEDGING PURPOSES
DERIVATIVE FINANCIAL INSTRUMENTS
USED FOR HEDGING PURPOSES
restated according to IFRS 17 and 9
Interest rate derivatives
Foreign exchange derivatives
DERIVATIVE FINANCIAL INSTRUMENTS
NOT USED FOR HEDGING PURPOSES
DERIVATIVE FINANCIAL INSTRUMENTS
USED FOR HEDGING PURPOSES
Transfers between levels may occur when an instrument fulfils the
criteria defined, which are generally market and product dependent.
The main factors influencing transfers are changes in the observation
capabilities, passage of time, and events during the transaction lifetime.
The timing of recognising transfers is determined at the beginning of
During the year 2023, the main transfers between Level 1 and Level 2 are
related to the reclassification of equity derivatives from Level 1 to Level 2
due to the reassessment of the observable nature of the associated
Description of main instruments in each level
The following section provides a description of the instruments in each
level in the hierarchy. It describes notably instruments classified in
Level 3 and the associated valuation methodologies.
For main trading book instruments and derivatives classified in Level 3,
further quantitative information is provided about the inputs used to
This level encompasses all derivatives and securities that are quoted
continuously in active markets.
Level 1 includes notably equity securities and liquid bonds, shortselling
of these instruments, derivative instruments traded on organised
markets (futures, options, etc.). It includes shares of funds and UCITS,
for which the net asset value is calculated on a daily basis, as well as
debt representative of shares of consolidated funds held by third parties.
The Level 2 stock of securities is composed of securities which are
less liquid than the Level 1 bonds. They are predominantly corporate
debt securities, government bonds, mortgage-backed securities, fund
shares and short-term securities such as certificates of deposit. They
are classified in Level 2 notably when external prices for the same
security can be regularly observed from a reasonable number of market
makers that are active in this security, but these prices do not represent
directly tradable prices. This comprises amongst other, consensus pricing
services with a reasonable number of contributors that are active market
makers as well as indicative runs from active brokers and/or dealers.
Other sources, such as primary issuance market, may also be used where
Repurchase agreements are classified predominantly in Level 2. The
classification is primarily based on the observability and liquidity of the
repo market, depending on the underlying collateral and the maturity
Debts issued designated as at fair value through profit or loss, are
classified in the same level as the one that would apply to the embedded
derivative taken individually. The issuance spread is considered
Derivatives classified in Level 2 comprise mainly the following
\u25a0 vanilla instruments such as interest rate swaps, caps, floors and
swaptions, credit default swaps, equity/foreign exchange (FX)/
commodities forwards and options;
\u25a0 structured derivatives for which model uncertainty is not significant
such as exotic FX options, mono- and multi-underlying equity/funds
derivatives, single curve exotic interest rate derivatives and derivatives
based on structured rates.
The above derivatives are classified in Level 2 when there is a documented
stream of evidence supporting one of the following:
\u25a0 fair value is predominantly derived from prices or quotations of
other Level 1 and Level 2 instruments, through standard market
interpolation or stripping techniques whose results are regularly
corroborated by real transactions;
\u25a0 fair value is derived from other standard techniques such as replication
or discounted cash flows that are calibrated to observable prices, that
bear limited model risk and enable an effective offset of the risks of the
instrument through trading Level 1 or Level 2 instruments;
\u25a0 fair value is derived from more sophisticated or proprietary valuation
techniques but is directly evidenced through regular back-testing using
external market-based data.
Determining whether an over-the-counter (OTC) derivative is eligible
for Level 2 classification involves judgement. Consideration is given to
the origin, transparency and reliability of external data used, and the
amount of uncertainty associated with the use of models. It follows that
the Level 2 classification criteria involve multiple analysis axis within an
\"observability zone\" whose limits are determined by i) a predetermined
list of product categories and ii) the underlying and maturity bands.
These criteria are regularly reviewed and updated, together with the
applicable valuation adjustments, so that the classification by level
remains consistent with the valuation adjustment policy.
Level 3 securities of the trading book mainly comprise units of funds
and unlisted equity shares measured at fair value through profit or loss
Unlisted private equities are systematically classified as Level 3, with
the exception of UCITS with a daily net asset value, which are classified
in Level 1 of the fair value hierarchy.
Shares and other unlisted variable income securities in Level 3 are valued
using one of the following methods: a share of revalued net book value,
multiples of comparable companies, future cash flow method, multi-
Repurchase agreements, mainly long-term or structured repurchase
agreements on corporate bonds and ABSs: the valuation of these
transactions requires proprietary methodologies given the bespoke nature
of the transactions and the lack of activity and price discovery in the
long-term repo market. The curves used in the valuation are corroborated
using available data such as recent long-term repo trade data and price
enquiry data. Valuation adjustments applicable to these exposures are
commensurate with the degree of uncertainty inherent in the modelling
choices and amount of data available.
Debts issued designated as at fair value through profit or loss, are
classified in the same level as the one that would apply to the embedded
derivative taken individually. The issuance spread is considered
Vanilla derivatives are classified in Level 3 when the exposure is beyond
the observation zone for rate curves or volatility surfaces, or relates
to less liquid markets such as tranches on old credit index series or
emerging markets interest rates markets. The main instruments are:
\u25a0 Interest rate derivatives: exposures mainly comprise swap products
in less liquid currencies. Classification is driven by the lower liquidity
of some maturities, while observation capabilities through consensus
may be available. The valuation technique is standard, and uses
external market information and extrapolation techniques;
\u25a0 Credit derivatives (CDS): exposures mainly comprise CDSs beyond the
maximum observable maturity and, to a much lesser extent, CDSs on
illiquid or distressed names and CDSs on loan indices. Classification
is driven by the lack of liquidity while observation capabilities may
be available notably through consensus. Level 3 exposures also
comprise CDS and Total Return Swaps (TRS) positions on securitised
assets. These are priced along the same modelling techniques as the
underlying bonds, taking into consideration the funding basis and
\u25a0 Equity derivatives: exposures essentially comprise long dated
forward or volatility products or exposures where there is a limited
market for optional products. The marking of the forward curves and
volatility surfaces beyond the maximum observable maturity relies
on extrapolation techniques. However, when there is no market for
model input, volatility or forward is generally determined on the basis
of proxy or historical analysis.
Similarly, long-term transactions on equity baskets are also classified
in Level 3, based on the absence of equity correlation observability on
These vanilla derivatives are subject to valuation adjustments linked to
uncertainty on liquidity, specialised by nature of underlying and liquidity
Structured derivatives classified in Level 3 predominantly comprise
hybrid products (FX/Interest Rates hybrids, Equity hybrids), credit
correlation products, prepayment-sensitive products, some stock basket
optional products and some interest rate optional instruments. The main
exposures are described below, with insight into the related valuation
techniques and on the source of uncertainty:
\u25a0 Structured interest rate options are classified in Level 3 when they
involve currencies where there is not sufficient observation or when
they include a quanto feature where the pay-off is measured with a
forex forward fixed rate (except for the main currencies). Long term
structured derivatives are also classified in Level 3;
\u25a0 Hybrid FX/Interest rate products essentially comprise a specific
product family known as Power Reverse Dual Currency (PRDC) when
there is material valuation uncertainty. When valuation of PRDCs
requires sophisticated modelling of joint behaviour of FX and interest
rate, and is notably sensitive to the unobservable FX/interest rate
correlations, such products are classified as Level 3. PRDCs valuations
are corroborated with recent trade data and consensus data;
\u25a0 Securitisation swaps mainly comprise fixed-rate swaps, cross-
currency or basis swaps whose notional is indexed to the prepayment
behaviour of some underlying portfolio. The estimation of the maturity
profile of securitisation swaps is corroborated by statistical estimates
using external historical data;
\u25a0 Forward volatility options are generally products whose pay-off
is indexed to the future variability of a rate index such as volatility
swaps. These products involve material model risk as it is difficult to
infer forward volatility information from market-traded instruments.
The valuation adjustment framework is calibrated to the uncertainty
inherent in the product, and to the range of uncertainty from the
existing external consensus data;
\u25a0 Inflation derivatives classified in Level 3 mainly comprise swap
products on inflation indices that are not associated with a liquid
indexed bond market, optional products on inflation indices (such
as caps and floors) and other forms of inflation indices involving
optionality on the inflation indices or on the inflation annual rate.
Valuation techniques used for inflation derivatives are predominantly
standard market models. Proxy techniques are used for a few limited
exposures. Although the valuations are corroborated through monthly
consensus data, these products are classified as Level 3 due to their
lack of liquidity and some uncertainties inherent in the calibration;
\u25a0 the valuation of bespoke CDOs requires correlation of default events
when there is material valuation uncertainty. This information is
inferred from the active index tranche market through a proprietary
projection technique and involves proprietary extrapolation and
interpolation techniques. Multi-geography CDOs further require an
additional correlation assumption. Finally, the bespoke CDO model
also involves proprietary assumptions and parameters related to the
dynamic of the recovery factor. CDO modelling is calibrated on the
observable index tranche markets, and is regularly back-tested against
consensus data on standardised pools. The uncertainty arises from
the model risk associated with the projection and geography mixing
technique, and the uncertainty of associated parameters, together
with the recovery modelling;
\u25a0 N to Default baskets are other forms of credit correlation products,
modelled through standard copula techniques. The main inputs
required are the pair-wise correlations between the basket components
which can be observed in the consensus and the transactions. Linear
baskets are considered observable;
\u25a0 Equity and equity-hybrid correlation products are instruments whose
pay-off is dependent on the joint behaviour of a basket of equities/
indices leading to a sensitivity of the fair value measurement to the
correlation amongst the basket components. Hybrid versions of these
instruments involve baskets that mix equity and non-equity underlyings
such as commodity indices, or foreign exchange rates. Only a subset
of the Equity/index correlation matrix is regularly observable and
traded, while most cross-asset correlations are not active. Therefore,
classification in Level 3 depends on the composition of the basket, the
maturity, and the hybrid nature of the product. The correlation input
is derived from a proprietary model combining historical estimators,
and other adjustment factors, that are corroborated by reference to
recent trades or external data. The correlation matrix is essentially
available from consensus services, and when a correlation between
two underlying instruments is not available, it might be obtained from
extrapolation or proxy techniques.
These structured derivatives are subject to specific valuation adjustments
to cover uncertainties linked to liquidity, parameters and model risk.
Valuation adjustments (CVA, DVA and FVA)
The valuation adjustment for counterparty credit risk (CVA), own-credit
risk for derivatives (DVA) and the explicit funding valuation adjustment
(FVA) are deemed to be unobservable components of the valuation
framework and therefore classified in Level 3. This does not impact,
in general cases, the classification of individual transactions into the
fair value hierarchy. However, a specific process allows to identify
individual deals for which the marginal contribution of these adjustments
and related uncertainty is significant and justifies classifying these
The table below provides the range of values of main unobservable inputs
for the valuation of Level 3 financial instruments. The ranges displayed
correspond to a variety of different underlying instruments and are
meaningful only in the context of the valuation technique implemented
by BNP Paribas. The weighted averages, where relevant and available,
are based on fair values, nominal amounts or sensitivities.
The main unobservable parameters used for the valuation of debt issued
in Level 3 are equivalent to those of their economic hedge derivative.
Information on those derivatives, displayed in the following table, is also
applicable to these debts.
Main product types composing the
Level 3 stock within the risk class
Valuation technique used for the product
Main unobservable inputs for
the product types considered
Long-term repo and reverse-
amongst other on the funding
basis of a benchmark bond
pool that is actively traded
and representative of the repo
private bonds (High Yield,0 bp to 152 bp30 bp(a)
Hybrid Forex/Interest rate
Hybrid Forex interest rate option
Hybrid inflation rates/Interest
Hybrid inflation interest rate
inflation rates mainly in
Floors and caps on inflation
1,384 1,928 rateor on the cumulative
inflation (such as redemption
floors), predominantly on
European and French inflation
Volatility of the year-on-
Forward Volatility products
such as volatility swaps,
Interest rate option pricing
Balance-guaranteed fixed rate,
basis or cross currency swaps,
European collateral pools
Collateralised Debt Obligations
and index tranches for inactive
Base correlation projection
Base correlation curve for
Recovery rate variance for
Single name Credit Default
Stripping, extrapolation and
2,875 6,146 derivativeson multi-
underlying baskets on stocks
Various volatility option models
(1) Theupper bound of the range relates to building, retail and services sector issuers that represent an insignificant portion of the balance sheet (CDSs with illiquid
(2) Theupper part of the range relates to 7 equities representing a non-material portion of the balance sheet on options with equity underlying instruments.
Including these inputs, the upper bound of the range would be around 196%.
(a) Weightsbased on relevant risk axis at portfolio level.
(b) Noweighting, since no explicit sensitivity is attributed to these inputs.
(c) Weightingis not based on risks, but on an alternative methodology in relation with the Level 3 instruments (present value or notional).
Table of movements in level 3 financial instruments
For Level 3 financial instruments, the following movements occurred during the year ended 2023:
restated according to IFRS 17 and 9
Gains (or losses) recognised in profit or
loss with respect to transactions expired
or terminated during the period
Gains (or losses) recognised in profit
or loss with respect to unexpired
instruments at the end of the period
Items related to exchange rate
Changes in fair value of assets and
liabilities recognised in equity
(1) Forthe assets, includes redemptions of principal, interest payments as well as cash inflows and outflows relating to derivatives. For the liabilities,
includes principal redemptions, interest payments as well as cash inflows and outflows relating to derivatives the fair value of which is negative.
Transfers out of Level 3 of derivatives include mainly the update of the
observability tenor of certain yield curves, and of market parameters
related to repurchase agreements and credit transactions but also the
effect of derivatives becoming only or mainly sensitive to observable
inputs due to the shortening of their lifetime.
Transfers into Level 3 of instruments at fair value reflect the effect of the
regular update of the observability zones.
Transfers have been reflected as if they had taken place at the beginning
The Level 3 financial instruments may be hedged by other Level 1 and
Level 2 instruments, the gains and losses of which are not shown in this
table. Consequently, the gains and losses shown in this table are not
representative of the gains and losses arising from management of the
net risk on all these instruments.
Sensitivity of fair value to reasonably possible
changes in level 3 assumptions
The following table summarises those financial assets and financial
liabilities classified as Level 3 for which alternative assumptions in one
or more of the unobservable inputs would change fair value significantly.
The amounts disclosed are intended to illustrate the range of possible
uncertainty inherent to the judgement applied when estimating Level 3
parameters, or when selecting valuation techniques. These amounts
reflect valuation uncertainties that prevail at the measurement date,
and even though such uncertainties predominantly derive from the
portfolio sensitivities that prevailed at that measurement date, they are
not predictive or indicative of future movements in fair value, nor do they
represent the effect of market stress on the portfolio value.
In estimating sensitivities, BNP Paribas either remeasured the financial
instruments using reasonably possible inputs, or applied assumptions
based on the valuation adjustment policy.
For the sake of simplicity, the sensitivity on cash instruments that are
not relating to securitised instruments was based on a uniform 1% shift
in the price. More specific shifts were however calibrated for each class
of the Level 3 securitised exposures, based on the possible ranges of the
For derivative exposures, the sensitivity measurement is based on
the credit valuation adjustment (CVA), the explicit funding valuation
adjustment (FVA) and the parameter and model uncertainty adjustments
Regarding the credit valuation adjustment (CVA) and the explicit funding
valuation adjustment (FVA), the uncertainty was calibrated based on
prudent valuation adjustments described in the technical standard
\"Prudent Valuation\" published by the European Banking Authority.
For other valuation adjustments, two scenarios were considered: a
favourable scenario where all or a portion of the valuation adjustment
is not considered by market participants, and an unfavourable scenario
where market participants would require twice the amount of valuation
adjustments considered by BNP Paribas for entering into a transaction.
restated according to IFRS 17 and 9
Equities and other equity securities
Loans and repurchase agreements
Derivative financial instruments
Interest rate and foreign exchange derivatives
SENSITIVITY OF LEVEL 3 FINANCIAL
Deferred margin on financial instruments
measured using techniques developed
internally and based on inputs partly
unobservable in active markets
Deferred margin on financial instruments (\"Day One Profit\") primarily
concerns the scope of financial instruments eligible for Level 3 and to
a lesser extent some financial instruments eligible for Level 2 where
valuation adjustments for uncertainties regarding parameters or models
are not negligible compared to the initial margin.
The Day One Profit is calculated after setting aside valuation adjustments
for uncertainties as described previously and released to profit or loss
over the expected period for which the inputs will be unobservable. The
unamortised amount is included under \"Financial instruments at fair
value through profit or loss\" as a reduction in the fair value of the relevant
Interest rate and foreign exchange derivatives
5.h DEBT SECURITIES AND SUBORDINATED DEBT
This note covers all issued debt securities and subordinated debt measured at amortised cost and designated as at fair value through profit or loss.
DEBT SECURITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS (NOTE 5.A)
(millions) interest step-up
payment(1) 31 December 2023
Redeemable subordinated debt
Perpetual subordinated debt
BNP Paribas Fortis Dec. 2007(3)
(1) Conditionsprecedent for coupon payment:
A Couponpayments are halted should the issuer have insufficient capital or the underwriters become insolvent or when the dividend declared for
Ageas shares falls below a certain threshold.
(2) Afteragreement from the banking supervisory authority and at the issuer's initiative, redeemable subordinated debt issues may contain a call
provision authorising the Group to redeem the securities prior to maturity by repurchasing them in the stock market, via public tender offers, or in the
case of private placements over the counter. Debt issued by BNP Paribas SA or foreign subsidiaries of the Group via placements in the international
markets may be subject to early redemption of the capital and early payment of interest due at maturity at the issuer's discretion on or after a
date stipulated in the issue particulars (call option), or in the event that changes in the applicable tax rules oblige the BNP Paribas Group issuer to
compensate debt-holders for the consequences of such changes. Redemption may be subject to a notice period of between 15 and 60 days, and is in all
cases subject to approval by the banking supervisory authorities.
(3) ConvertibleAnd Subordinated Hybrid Equity-linked Securities (CASHES) issued by BNP Paribas Fortis (previously Fortis Banque) in December 2007.
The CASHES are perpetual securities but may be exchanged for Ageas (previously Fortis SA/NV) shares at the holder's sole discretion at a price of
EUR 239.40. However, as of 19 December 2014, the CASHES will be automatically exchanged into Ageas shares if their price is equal to or higher than
EUR 359.10 for twenty consecutive trading days. The principal amount will never be redeemed in cash. The rights of the CASHES holders are limited to
the Ageas shares held by BNP Paribas Fortis and pledged to them.
Ageas and BNP Paribas Fortis have entered into a Relative Performance Note (RPN) contract, the value of which varies contractually so as to offset the
impact on BNP Paribas Fortis of the relative difference between changes in the value of the CASHES and changes in the value of the Ageas shares.
Since 1 January 2022, the liability is no longer eligible to prudential own funds.
DEBT SECURITIES MEASURED AT AMORTISED COST
Currency (millions) interest step-up
payment(1) 31 December 2023
Debt securities in issue with an initial maturity of less than one year
Negotiable debt securities
Debt securities in issue with an initial maturity of more than one year
Negotiable debt securities
Redeemable subordinated debt
Undated subordinated notes
BNP Paribas SA Oct. 85(5)
BNP Paribas SA Sept. 86(5)
BNP Paribas Cardif Nov. 14
BNP Paribas SA Aug. 23(6)
BNP Paribas SA July 84(3) (5)
Expenses and commission, related debt
(1) Conditionsprecedent for coupon payment:
B Paymentof the interest is mandatory, unless the Board of directors decides to postpone these payments after the shareholders' General Meeting
has officially noted that there is no income available for distribution, where this occurs within the 12-month period preceding the due date for
payment of the interest. Interest payments are cumulative and are payable in full once dividend payments resume;
C Paymentof the interest is mandatory, unless the Board of directors decides to postpone these payments after the shareholders' General Meeting
has validated the decision not to pay out a dividend, where this occurs within the 12-month period preceding the due date for payment of the
interest. Interest payments are cumulative and are payable in full once dividend payments resume. The bank has the option of resuming payment
of interest arrears, even where no dividend is paid out;
D Paymentof the interest is mandatory, except for cases of regulatory deficiency, in agreement with the regulator, or of suspension of payments.
Interest payments are cumulative and are payable in full, once coupon payments resume, or, if these events occur before, when the issuance is
redeemed or when the issuer is liquidated;
E Paymentof the interest is at full discretion and could be cancelled in whole or in part if the relevant regulator notifies based on its assessment of
the financial and solvency situation of the issuer. Interest Amounts on the notes will be non-cumulative, once coupon payments resume.
(2) Seereference relating to \"Debt securities at fair value through profit or loss\".
(3) Theparticipating notes issued by BNP Paribas SA may be repurchased as provided for in the law of 3 January 1983. The number of notes in the market
(4) Dependingon net income subject to a minimum of 85% of the TMO rate and a maximum of 130% of the TMO rate.
(5) Asfrom 31 December 2023, these securities are no longer eligible to prudential own funds.
(6) Theinstruments issued by BNP Paribas SA in August 2023 are contingent convertible securities classified as financial liabilities in accounting and
eligible to Additionnal Tier 1 capital (see note 1.f.8).
5.o OFFSETTING OF FINANCIAL ASSETS
The following tables present the amounts of financial assets and
liabilities before and after offsetting. This information, required by
IFRS 7, aims to enable the comparability with the accounting treatment
applicable in accordance with generally accepted accounting principles
in the United States (US GAAP), which are less restrictive than IAS 32
\"Amounts set off on the balance sheet\" have been determined according
to IAS 32. Thus, a financial asset and a financial liability are offset and
the net amount presented on the balance sheet when, and only when, the
Group has a legally enforceable right to set off the recognised amounts
and intends either to settle on a net basis, or to realise the asset and
settle the liability simultaneously. Amounts set off derive mainly from
repurchase agreements and derivative instruments traded with clearing
The \"impacts of master netting agreements and similar agreements\" are
relative to outstanding amounts of transactions within an enforceable
agreement, which do not meet the offsetting criteria defined by IAS 32.
This is the case of transactions for which offsetting can only be performed
in case of default, insolvency or bankruptcy of one of the contracting
\"Financial instruments given or received as collateral\" include
guarantee deposits and securities collateral recognised at fair value.
These guarantees can only be exercised in case of default, insolvency or
bankruptcy of one of the contracting parties.
Regarding master netting agreements, the guarantee deposits received or
given in compensation for the positive or negative fair values of financial
instruments are recognised in the balance sheet in accrued income or
expenses and other assets or liabilities.
5.p TRANSFERS OF FINANCIAL ASSETS
Financial assets that have been transferred but not derecognised by the Group are mainly composed of securities sold temporarily under repurchase
agreements or securities lending transactions, as well as securitised assets. The liabilities associated to securities temporarily sold under repurchase
agreements consist of debts recognised under the \"repurchase agreements\" heading. The liabilities associated to securitised assets consist of the
securitisation notes purchased by third parties.
SECURITIES LENDING, REPURCHASE AGREEMENTS AND OTHER TRANSACTIONS:
restated according to IFRS 17 and 9
liabilities transferredassets
Securities lending operations
Financial instruments at fair value through profit or loss
Financial assets at amortised cost
Financial assets at fair value through equity
Financial instruments at fair value through profit or loss
Financial assets at amortised cost
Financial assets at fair value through equity
Financial investments of insurance activities
SECURITISATION TRANSACTIONS PARTIALLY REFINANCED BY EXTERNAL INVESTORS, WHOSE RECOURSE IS LIMITED
TO THE TRANSFERRED ASSETS:
In millions of euros, at 31 December 2023
liabilities transferredassets
Financial assets at amortised cost
In millions of euros, at 31 December 2022
restated according to IFRS 17 and 9
liabilities transferredassets
Financial assets at amortised cost
There have been no significant transfers leading to partial or full derecognition of the financial assets in which the Bank has a continuing involvement.
Market risk: rate risk and asset value variation
Sensitivity of the valuation of financial assets and liabilities related to insurance contracts, on the profit or loss and on equity to a variation of +/-50bps
of interest rates and to a variation of +/-10% of the equity market and real estate market.
The table below presents impacts before tax:
Potential impact on income
Potential impact on equity
contracts Netimpact investments
+50 bps variation of interest rate risk
-50 bps variation of interest rate risk
+10% variation of equity market
-10% variation of equity market
+10% variation of real estate market
-10% variation of real estate market
(1) Exceptfinancial assets representing unit-linked contracts.
The sensitivity was measured for most significant countries, i.e. France, Italy and Luxembourg.
For savings contracts measured under the variable fee approach, changes
in the value of underlying financial assets are largely offset by changes in
the value of liabilities, as contractual service margin is positive.
Potential impacts on profit and loss and equity are mainly due to non-
participating contracts and to assets backing insurance entities' equity.
The accounting classification of securitisation positions in the banking
book is shown in Table 9:Prudential balance sheet by risk type (EU LI1-B).
Securitisation positions classified as \"Financial assets at amortised cost\"
are measured using the method described in note 1.f.1 Financial assets
at amortised cost to the consolidated financial statements: the effective
interest rate used to recognise interest income is measured on the basis
of an expected cash flow model. From the outset, these positions are
subject to an impairment calculation for expected credit risk losses (see
note 1.f.5Impairment of financial assets measured at amortised cost and
debt instruments measured at fair value through shareholders' equity
to the consolidated financial statements).
Securitisation positions classified on an accounting basis as \"Financial
assets at fair value through equity\" are measured using the method
described in note 1.f.2 Financial assets at fair value through shareholders'
equity to the consolidated financial statements. Changes in fair value
determined according to the principles listed in note 1.f.10 Determination
of fair value to the consolidated financial statements (excluding revenue
recognised using the effective interest method) are presented in a specific
subsection of shareholders' equity along with expected credit risk
losses calculated using the methods described in note 1.f.5 Impairment
of financial assets measured at amortised cost and debt instruments
measured at fair value through shareholders' equity to the consolidated
financial statements. Upon disposal, amounts previously recognised in
recyclable equity are transferred to the profit and loss account.
Securitisation positions classified on an accounting basis as \"Financial
instruments at fair value through profit or loss\" are measured using the
method described in note 1.f.7 Financial instruments at fair value through
profit or loss to the consolidated financial statements.
Proceeds from the sale of securitisation positions are recognised in
accordance with rules for the category of origin of positions sold.
Synthetic securitisations in the form of credit derivatives (credit default
swaps) or guarantees received follow accounting rules appertaining
\u25a0 to trading portfolio derivatives. These are measured at fair value
through profit or loss (see note 1.f.7 Financial instruments at fair
value through profit or loss to the consolidated financial statements);
\u25a0 to financial guarantees received, which cannot be considered as
forming an integral part of secured assets. If it is virtually certain
that a loss caused by a defaulting debtor will be offset by the guarantor,
the guarantee is then recognised as a reimbursement asset (right
to reimbursement for expected credit losses) and expected credit
losses on the asset are, at the same time, recognised in profit or
loss. The overall impact in terms of profit or loss is the same as if
the guarantee had been recognised in the measurement of expected
credit losses, with the difference that the guarantee received is shown
as a reimbursement asset rather than as a reduction in the expected
credit losses on the asset.
Assets awaiting securitisation are classified as:
\u25a0 financial instruments at amortised cost or at fair value through equity
and in the prudential banking book in the case of exposures resulting
from the Bank's balance sheet, for which the Bank will be originator
in the future securitisation within the meaning of Basel 3;
\u25a0 financial instruments at fair value through profit or loss and in the
prudential banking book in the case of exposures purchased and put
into warehousing, for which the Bank will be sponsor in the future
securitisation within the regulatory meaning.
Structural foreign exchange risk [Audited]
Currency hedges are contracted by the ALM Treasury in relation to the
Group's investments in foreign currencies and its future foreign currency
revenues. Each hedging relationship is formally documented at inception.
The documentation describes the hedging strategy, identifies the hedged
item and the hedging instrument, and the nature of the hedged risk and
describes the methodology used to test the expected (prospective) and
actual (retrospective) effectiveness of the hedge.
A hedging relationship is applied and documented for investments in
subsidiaries and branches financed by foreign currency loans so as to
record movements in exchange rates symmetrically and avoid impacts
on the profit and loss account. In this context, these instruments are
designated as net investment hedges. The amount of these loans stood
at EUR 16 billion at 31 December 2023, compared with EUR 23 billion at
31 December 2022. The changes in value related to exchange differences
recognised directly in equity with respect to these hedges amounted
to +EUR 339 million in 2023, compared with -EUR 303 million at
During the 2023 financial year, no net investment hedging relationships
The amount recorded in the profit and loss account for 2023 with respect
to the ineffective portion of hedges of net investments is immaterial.
Hedging of financial instruments recognised
in the balance sheet (Fair Value Hedge)
Fair value hedges of interest rate risks relate either to identified fixed-
rate assets or liabilities, or to portfolios of fixed-rate assets or liabilities.
Derivatives are contracted to reduce the exposure of the fair value of
these instruments to changes in interest rates.
Individual assets hedging consists mainly of securities classified as
\"Financial assets at amortised cost\" or \"Financial assets at fair value
through equity\"; individual liabilities hedging consists mainly of fixed-
income securities issued by the Group.
Hedges of portfolios of financial assets and liabilities, constructed by
\u25a0 fixed-rate loans (property loans, equipment loans, consumer credit
\u25a0 fixed-rate deposits (mainly demand deposits and funds deposited
under home savings contracts).
To identify the hedged amount, the residual balance of the hedged item is
split into maturity bands, and a separate amount is designated for each
band. The maturity split is determined on the basis of the contractual
terms of the transactions and historical observations of customer
behaviour (early redemption assumptions and estimated default rates).
Demand deposits, which do not bear interest at contractual rates, are
qualified as fixed-rate medium-term financial liabilities. Consequently, the
value of these liabilities is sensitive to changes in interest rates. Estimates
of future cash outflows are based on historical analyses.
For each hedging relationship, expected hedge effectiveness is measured
by ensuring that for each maturity band, the fair value of the hedged
items is greater than the fair value of the designated hedging instruments.
Actual effectiveness is assessed on an ex-post basis by ensuring that the
monthly change in the fair value of hedged items since the start of the
month does not indicate any over-hedging.
In terms of interest rate risk, the Group uses derivative instruments
to hedge fluctuations in income and expenses arising on floating-rate
assets and liabilities. Highly probable forecast transactions are also
hedged. Hedged items are split into maturity bands by currency and
benchmark interest rate. After factoring in early redemption assumptions
and estimated default rates, the Group uses derivatives to hedge some
or all of the risk exposure generated by these floating-rate instruments.
In terms of foreign exchange risk, the Group hedges against variability
in components of consolidated net income. In particular, the Group may
hedge future revenue flows (especially interest income and fees) derived
from operations carried out by its main subsidiaries and/or branches
in a currency other than their functional currencies. As in the case of
interest rate hedges, the effectiveness of these hedging relationships
is documented and assessed on the basis of forecast maturity bands.
The table below concerns the scope of BNP Paribas SA's medium- and
long-term transactions and shows the amount of hedged future cash
flows (split by forecast date of realisation), which constitute the majority
of the Group's hedging transactions.
TABLE 92: HEDGED CASH FLOWS [Audited]
In 2023, no cash flow hedges were declassified on the grounds that achieving these future earnings would no longer be highly probable.
1.f.2 Financialassets at fair value through
Debt instruments are classified at fair value through shareholders' equity
if the following two criteria are met:
\u25a0 business model criterion: financial assets are held in a business model
whose objective is achieved by both holding the financial assets in
order to collect contractual cash flows and selling the financial assets
(\"collect and sale\"). The latter is not incidental but is an integral part
\u25a0 cash flow criterion: the principles are identical to those applicable to
financial assets at amortised cost.
The securities held by the Group ALM Treasury in order to collect
contractual flows or to be sold and meeting the cash flow criterion are
in particular classified in this category.
On initial recognition, financial assets are recognised at their fair value,
including transaction costs directly attributable to the transaction.
They are subsequently measured at fair value and changes in fair value
are recognised, under a specific line of shareholders' equity entitled
\"Changes in assets and liabilities recognised directly in equity that may be
reclassified to profit or loss\". These financial assets are also subject to the
measurement of a loss allowance for expected credit losses on the same
approach as for debt instruments at amortised cost. The counterparty
of the related impact in cost of risk is recognised in the same specific
line of shareholders' equity. On disposal, changes in fair value previously
recognised in shareholders' equity are reclassified to profit or loss.
In addition, interest is recognised in the income statement using the
effective interest method determined at the inception of the contract.
Investments in equity instruments such as shares are classified on option,
and on a case-by-case basis, at fair value through shareholders' equity
(under a specific line). On disposal of the shares, changes in fair value
previously recognised in equity are not recognised in profit or loss. Only
dividends, if they represent remuneration for the investment and not
repayment of capital, are recognised in profit or loss. These instruments
are not subject to impairment.
Investments in mutual funds puttable to the issuer do not meet the
definition of equity instruments. They do not meet the cash flow criterion
either, and thus are recognised at fair value through profit or loss.
1.f.4 Regulatedsavings and loan contracts
Home savings accounts (Comptes \u00c9pargne-Logement \u2013 \"CEL\") and home
savings plans (Plans d'\u00c9pargne Logement \u2013 \"PEL\") are government-
regulated retail products sold in France. They combine a savings phase
and a loan phase which are inseparable, with the loan phase contingent
These products contain two types of obligations for BNP Paribas: an
obligation to pay interest on the savings for an indefinite period, at a
rate set by the government at the inception of the contract (in the case
of PEL products) or at a rate reset every six months using an indexation
formula set by law (in the case of CEL products); and an obligation to lend
to the customer (at the customer's option) an amount contingent upon
the rights acquired during the savings phase, at a rate set at the inception
of the contract (in the case of PEL products) or at a rate contingent upon
the savings phase (in the case of CEL products).
The Group's future obligations with respect to each generation (in the
case of PEL products, a generation comprises all products with the same
interest rate at inception; in the case of CEL products, all such products
constitute a single generation) are measured by discounting potential
future earnings from at-risk outstandings for that generation.
At-risk outstandings are estimated on the basis of a historical analysis
of customer behaviour, and are equivalent to:
\u25a0 for the loan phase: statistically probable loans outstanding and actual
\u25a0 for the savings phase: the difference between statistically probable
outstandings and minimum expected outstandings, with minimum
expected outstandings being deemed equivalent to unconditional term
Earnings for future periods from the savings phase are estimated as the
difference between the reinvestment rate and the fixed savings interest
rate on at-risk savings outstanding for the period in question. Earnings
for future periods from the loan phase are estimated as the difference
between the refinancing rate and the fixed loan interest rate on at-risk
loans outstanding for the period in question.
The reinvestment rate for savings and the refinancing rate for loans
are derived from the swap yield curve and from the spreads expected
on financial instruments of similar type and maturity. Spreads are
determined on the basis of actual spreads on fixed-rate home loans in
the case of the loan phase and products offered to individual clients in
the case of the savings phase. In order to reflect the uncertainty of future
interest rate trends, and the impact of such trends on customer behaviour
models and on at-risk outstandings, the obligations are estimated using
Where the sum of the Group's estimated future obligations with respect
to the savings and loan phases of any generation of contracts indicates a
potentially unfavourable situation for the Group, a provision is recognised
CREDIT POLICIES [Audited]
The Bank's lending activities are governed by the Global Credit Policy.
It applies to all Group activities that generate credit or counterparty
risk. The Global Credit Policy provides general principles (including the
risk assessment and decision-making process, adherence to the highest
standards of compliance and ethics) applicable to all credit risk, as well
as specific principles applicable to country risk, sector risks, clients
selection and the transaction structures. It is supplemented by specific
policies tailored to each type of business or counterparty.
These credit policies are regularly updated in line with developments in
the credit environment in which the Group operates.
Corporate Social and Environmental
Since 2012, clauses on Corporate Social and Environmental Responsibility
(CSR) are included in specific new credit policies or when existing policies
Furthermore, sectoral policies and financing exclusions for certain
sectors presenting significant Environmental, Social and Governance
(ESG) challenges (described in the Commitment 3, section of chapter 7,
Systematic integration and management of Environmental, social and
governance risks (ESG)) have been implemented since 2011 and steadily
strengthened since then. These risks are also analysed in the context of
sector reviews and country envelope limits.
The Group is also taking a number of steps to improve the incorporation
of ESG risks factors, especially those linked to climate change, in its credit
risk system. Within this context, the Group continues to strengthen the
ESG assessment of its clients to make it more systematic and to better
understand the ESG risk profile associated.
Expanding the ESG analysis of corporate
customers thanks to a risk assessment tool:
BNP Paribas takes ESG criteria into account in its decision-making
processes. ESG criteria are integrated into the Know Your Client (KYC) as
well as into the Global Credit policy and, when more precise criteria are
deemed relevant, in specific credit policies.
In addition to the current ESG risk assessment framework (sectoral
policies, specific credit policies), an ESG assessment tool has been
deployed since June 2021: ESG Assessment, which progressively replaces
previous set-ups. It makes it possible to identify, assess and monitor
the ESG performance and risks of corporate customers according to the
specific characteristic of each of their sectors, with a common approach
within the Group for a given customer segment.
The assessment aims to perform an ESG analysis at business group level
as part of the credit process, a key pillar of banking financing activities,
thus integrating ESG criteria with the other analysis parameters included
in the assessment of the counterparty's credit profile
The ESG Assessment covers the environmental (climate, biodiversity),
social (health and safety at work, consumer protection and impact on
communities) and governance (business ethics) dimensions through a
set of questions, supplemented by an analysis of controversies affecting
the client. The questionnaires developed in this context are specific to
each sector in order to better integrate the challenges and issues specific
This tool makes it possible to assess clients' compliance with the Group's
sectoral policies, as well as the maturity of their ESG strategy and its
The deployment of ESG Assessment, included in the credit files for all
large corporate business groups regardless of their activity, enables the
RISK Function to exercise greater control over the ESG dimensions during
credit committees on a documented basis. Currently designed for large
companies, this framework has been adapted and will be extended to
additional customer segments (corporates with a turnover of more than
EUR 50 million and financial institutions) starting from 2024.
INDIVIDUAL DECISION-MAKING
A system of discretionary credit delegations has been established,
under which all lending decisions must be approved by managers
or representatives of the business teams, with the concurrence of a
formally designated RISK representative. Approvals are systematically
evidenced in writing, possibly electronically either by means of a signed
approval form or in the minutes of formal Credit Committee meetings.
Discretionary credit delegations correspond to aggregate commitments
by business group and vary according to internal credit ratings and the
specific nature of the business concerned. All transactions proposed
are subject to a detailed review of the borrower's current and future
position. The review, conducted when granting the transaction and
updated at least on an annual basis, is designed to ensure the Group has
a comprehensive understanding of the borrower and can monitor any
potential changes in its situation. Certain types of lending commitments,
such as loans to financial institutions, sovereign loans and loans to
customers operating in certain industries that are exposed to cyclical
risks or to a rapid pace of change, are subject to specific authorisation
procedures and require the sign-off of an industry expert or designated
specialist. In Retail Banking, simplified procedures are applied, based
on statistical decision-making aids.
Credit applications must comply with the Bank's Global Credit Policy
and any relevant specific policies. Material exceptions undergo a
special approval process. Before making any commitments, BNP Paribas
carries out an in-depth review of any known development plans of
the borrower, and ensures that it has thorough knowledge of all the
structural aspects of the borrower's operations and that adequate
monitoring will be possible.
The General Management Credit Committee (CCDG) is the highest level
Group committee for all decisions related to credit and counterparty
risk. It has in particular ultimate decision-making authority for all credit
applications notably for amounts in excess of individual discretionary
credit delegations or applications that would not comply with the Global
MANAGEMENT PROCEDURES [Audited]
A comprehensive risk monitoring system is organised around control
units, which are responsible for ensuring that lending commitments
comply with the credit decision, that credit risk reporting data are
reliable and that risks are effectively monitored. Daily irregular exception
reports are produced and various early warning tools are used to identify
early the deterioration of credit risks. The various monitoring levels are
carried out under the supervision of RISK. Non-performing loans or those
placed under credit watch (see Exposures, provisions and cost of risk) are
overseen more closely via dedicated quarterly committee meetings (see
the Governance part of section 5.3 Risk management). To supplement
this mechanism, the Doubtful Committee meets on a monthly basis to
validate the proposed changes in individual provisions for doubtful loans
for which an adjustment is necessary based on expected financial flows.
The responsibilities of the control teams include the monitoring of
exposures against approved authorisations, covenants, and guarantees.
This allows the identification of any signs of deterioration against the
risk profile approved by the Credit Committee. Control teams flag up (to
the RISK teams and business units) any cases that fail to comply with
Credit Committee decisions and oversee their resolution. In some cases, a
specific alert is sent to the senior management of RISK and of the relevant
business unit. These are mainly where exceptions remain unresolved and/
or where there are serious indications of deterioration in the risk profile
compared with that approved by the Credit Committee.
Furthermore, since 2018 the General Credit Policy has included specific
checks to be conducted for loans granted to clients presenting high
leverage ratios, in accordance with European Central Bank guidelines.
Overall portfolio management and monitoring
The selection and careful evaluation of individual risks taken are
supported by a monitoring and risk control system based on more
aggregated portfolio levels in terms of division/business line, regions,
industry, business/product.
The overall portfolio management policy, including concentration of risk
by single name, industry and country, is based on this monitoring system
and Group Risk Committees review all reports and analyses produced:
\u25a0 risk concentration by country is managed through country risk limits
that are set at the appropriate level of delegated authority for each
country. The Group, which is naturally present in most economically
active areas endeavours to avoid excessive concentrations of risk in
countries with a high geopolitical risk or unstable political structures
or which economic position has been undermined. Country envelope
limits are reviewed at least once a year, and quarterly reports are
\u25a0 the Group closely monitors individual concentrations, in particular
on business groups, corporates, banks or sovereign debts. These
concentrations are reported in the quarterly risk report to CCIRC.
Related policies implemented by the Group are described under Credit
risk diversification of this section;
\u25a0 regular reviews by the Group are carried out of portfolios in certain
industries, either because of the magnitude of the Group's exposure
to the sector or because of sector-specific risks, such as the cyclical
nature of the industry or rapid technological developments. In these
reviews, special focus is placed on ESG issues in potentially sensitive
sectors. The Group draws on the expertise of the relevant business
lines and independent industry specialists working in RISK (Industry
and Sector Studies). These reviews provide Executive Management,
and if appropriate the CCIRC, with an overview of the Group's exposure
to the sector under consideration, and assist it to decide on strategic
guidelines. As an illustration, in 2023, an internal portfolio review was
undertaken on Petrol & Gas, electricity generation, commercial real
estate, Metals & Mining, and automotive;
\u25a0 Stress tests assess portfolio vulnerabilities by measuring the impact
of various adverse scenarios. They are conducted on a quarterly basis
on the entire portfolio and on an ad hoc basis on sub-portfolios to
identify any concentrations. They help to ensure that the Bank's credit
risk exposure is in line with its risk appetite.
Lastly, BNP Paribas may use credit risk transfer instruments, such as
securitisation programmes, credit derivatives or credit insurance, to
mitigate individual risks, reduce portfolio concentration or cap potential
losses arising from crisis scenarios.
The Group applies the impairment procedures described below for all
loans subject to impairment (see note 1.f.5 Impairment of financial assets
at amortised cost and of debt instruments at market value through
shareholders' equity to the consolidated financial statements):
\u25a0 impairment valuation procedure for performing loans:
A loss allowance for loans in stage 1 or stage 2 is constituted by each
operating division based on an estimation of expected credit losses.
This is validated on a quarterly basis during a committee meeting
attended by the Chief Financial Officer and Chief Risk Officer of each
operating division. Estimations of expected credit losses result from
the default risk in the coming twelve months for financial instruments
whose credit risk has not significantly increased since initial recognition
(stage 1) or upon maturity for unimpaired loans whose credit risk
has significantly increased since initial recognition (stage 2). A tool
used by most of the Group's business lines enables calculations to be
performed based on the parameters of the rating system described
below and integrating the potential impact of macroeconomic and
\u25a0 impairment valuation procedure for defaulted exposures:
Monthly, RISK reviews corporate, bank and sovereign loans, requiring a
review of their impairment, to determine the amount of any decrease
in value to be recognised, either by reducing the carrying amount or
by recording a provision for impairment, in accordance with applicable
accounting standards (see note 1.f.5 Impairment of financial assets
measured at amortised cost and debt instruments measured at fair
value through shareholders' equity to the consolidated financial
statements). The Group uses various methodologies (expert opinions,
statistical calculations) for defaulted exposures to retail customers.
These impairments are referred to as stage 3. The amount of this
impairment loss is based on the present value of probable recovered
net cash flows issued from several scenarios, including from
the possible realisation of the collateral held. The amount of this
impairment loss is based on the present value of probable recovered
net cash flows under various scenarios and including from the possible
realisation of the collateral held. Estimated expected cash flows also
includes a cash flow scenario from the possible sale of non-performing
loans or all loans. Proceeds from the sale is net of costs associated
Each counterparty is rated internally by the Group using uniform
principles, regardless of the approach used to calculate regulatory capital
The Bank has a comprehensive internal rating system compliant
with regulatory requirements regarding capital adequacy. A periodic
assessment and control process has been deployed within the Bank to
ensure that the system is appropriate and correctly implemented. The
system was formally validated by the supervisor in December 2007 and
is inspected on a regular basis.
For loans to institutions, corporates, sovereigns and specialised lendings,
the system is based on three parameters: the counterparty's probability of
default (PD) expressed via a rating, the Global Recovery Rate (GRR) or its
complement, Loss Given Default (LGD), which depends on the structure of
the transaction, and the Credit Conversion Factor (CCF) which estimates
the off-balance sheet exposure at risk.
There are twelve counterparty ratings. Ten cover performing clients with
credit assessments ranging from \"excellent\" to \"very concerning\", and
two relate to clients classified as in default, as per the definition by the
Confirmation or amendments to the probability of default parameters
and GRR applicable to each transaction are reviewed at least once a
year as part of the loan approval process or annual credit review. These
are based on the combined expertise of business line staff and, as a
second look, the RISK representatives (who have the final say in case
of disagreement). It uses appropriate tools including analysis aids and
credit scoring systems. The decision to use these tools and the choice of
technique depends on the nature of the risk.
For retail counterparties, the system is also based on three parameters:
Probability of Default (PD), the Global Recovery Rate (GRR) and the Credit
Conversion Factor (CCF). On the other hand, rating methods are applied
automatically to determine the loan parameters.
Internal estimates of risk parameters are used in the Bank's day-to-day
management in line with regulation recommendations. Thus, apart
from calculating capital requirements, they are used for example when
setting delegated limits, granting new loans or reviewing existing loans
to measure profitability, determine impairments and for book analyses.
TABLE 27: INDICATIVE MAPPING OF INTERNAL
COUNTERPARTY RATING WITH AGENCY RATING
SCALE AND AVERAGE EXPECTED PD
EXPOSURES, PROVISIONS AND COST OF RISK [Audited]
Impaired exposures (stage 3) related to assets at amortised cost and
financing and guarantee commitments given, as well as the guarantees
received as collateral are presented in note 5.f Impaired exposures. The
definition of impaired loans (stage 3) is presented in note 1.f.5 Impairment
of financial assets measured at amortised cost and debt instruments
measured at fair value through shareholders' equity, Definition of default
The following table shows the carrying amount of performing and
non-performing(1) financial assets included in the prudential consolidation
An exposure is deemed to be non-performing when it falls into one of
the following categories:
\u25a0 exposures in default;
\u25a0 90 days past-due exposures which are not in default;
\u25a0 restructured loans (see the Restructured loans section) during the one-
year minimal period required before returning to performing status.
In this part, in accordance with the Implementing Regulation (EU)
No. 2021/637, the scope of the tables in this section includes the
\u25a0 current accounts with central banks (cash accounts are not
\u25a0 loans and receivables and debt securities at amortised cost;
\u25a0 loans and receivables and debt securities at fair value through equity;
\u25a0 loans and receivables and debt securities at fair value through profit
or loss excluding the trading portfolio;
\u25a0 financing and guarantee commitments outside the trading portfolio.
Exposures in default include impaired loans and receivables (stage 3) and
doubtful loans and receivables and debt securities at fair value through
profit or loss outside the trading book.
The classifications used for exposures shown are taken from financial
reports intended for the supervisory authority(2) and so differ from
the exposure classes usually used within the context of Pillar 3. The
\u25a0 public administrations including mainly central governments, regional
or local authorities and international organisations;
\u25a0 credit institutions including credit institutions and multilateral
\u25a0 other financial corporations including institutions (notably supervised
investment companies and clearing houses) and corporations (mainly
investment funds, pension funds and insurance companies);
\u25a0 non-financial corporations including mainly corporations and small
and medium enterprises (SME);
\u25a0 households: mainly non-SME retail portfolio.
In addition, in accordance with Appendix III and V of Implementing
Regulation (EU) No. 2021/451 regarding supervisory reporting of financial
institutions, the assets of activities held for sale(3) for the items listed
above, are presented on a separate line in the tables.
(1) At 31 December 2023, the Group's non-performing loans ratio was 2.2%, compared with 2.1% at 31 December 2022. This ratio is used by the European Banking Authority to monitor
non-performing outstandings in Europe. It is calculated on the basis of gross outstanding of loans, receivables and deposits with central banks, not netted of guarantees received.
(2) Appendices III and V of Implementing Regulation (EU) No. 2021/451 on supervisory reporting.
(3) See note 9.e Discontinued activities to the consolidated financial statements.
Industry risks are monitored in terms of gross exposure(1) and
risk-weighted assets. Certain sectors, defined in line with the principles of
the Group's Risk Appetite Statement, are subject to enhanced monitoring
and specific reviews. Their monitoring is carried out on a wider scope,
taking into account all the exposures of the Business Groups and entities
relating to these sectors as defined by the monitoring and the internal
risk management nomenclature.
\u25a0 the leveraged finance sector:
As at 31 December 2023, the Group's exposure to Leverage
Buy-Out transactions with financial sponsors (\"LBO\") amounted to
EUR 12.7 billion, or 0.7% of the Group's gross on-balance sheet and
off-balance sheet commitments, compared with EUR 18.4 billion, or
0.9% as at 31 December 2022. This reduction is partly due to lower new
production in the context of higher interest rates and to slowdown in
the M&A market. These exposures are very granular with an average
amount of EUR 12 million per loan (EUR 24 million taking into account
all exposures related to the business groups). This portfolio has proven
resilient in the current economic environment, despite an increase at
the end of the year in defaulted assets (EUR 762 million compared
to EUR 361 million in 2022) and stage 3 provisions amounting to
EUR 156 million (compared to EUR 125 million at end 2022).
\u25a0 the shipping sector:
the shipping sector covers a set of segments with very different
dynamics: bulk, oil and gas tankers, container carriers, oil services
and cruises. In 2023, these different segments were affected in
very heterogeneous ways by the evolution of the macro-economic
environment. The cruise segment benefitted from a progressive
recovery of demand but remains with the burden of banking debt and
export finance repayments that were delayed during the pandemic.
Some signs of slowdown of the maritime container transport are visible
since the second half of 2022, however this segment is still doing very
well. Lastly, the dry bulk and tanker segments remain subject to high
market volatility and have suffered both positive and negative impacts
from the consequences of the invasion of Ukraine and the Middle East
conflict. LNG and Floating Storage and Regasification Units (FRSUs)
benefited from the collapse of Russian natural gas exports to Europe
via pipeline and the lasting change in the geopolitical context.
The shipping industry has to face new environmental constraints
(International Maritime Organisation (IMO) standards) involving
investment efforts. A growing number of new orders concern hybrid
LNG (Liquefied Natural Gas) propulsion or other technologies with a
reduced impact on the environment.
At 31 December 2023 gross exposure of the shipping finance sector
was EUR 19.6 billion, i.e. 1.1% of the Group's gross on-balance sheet
and off-balance sheet credit exposures, compared to EUR 21.5 billion
or 1.1% at 31 December 2022. Most of this exposure is borne by
Corporate and Institutional Banking (more than 90%, like last year),
with good geographical diversification of the client base. Doubtful
loans account for 2.4% of the Group's exposure to the shipping finance
segment (compared to 3.2% of doubtful loans at 31 December 2022) and
stage 3 provisions were EUR 175 million (compared to EUR 230 million
in provisions at 31 December 2022);
\u25a0 the aviation sector:
business activity in this sector is evenly split between airlines and
aircraft leasing companies. The gross exposure is EUR 14.5 billion at
31 December 2023, i.e. 0.8% of the Group's total gross on- and off-
balance sheet commitments, versus EUR 14.4 billion, i.e. 0.7% of the
Group's total gross commitments at 31 December 2022. Origination
continues to be concentrated on leading airlines and the latest
technology aircrafts with lower environmental impact. The direct
and indirect consequences of the invasion of Ukraine have not had
a significant impact on the cost of risk of this portfolio yet. Thus,
the amount of doubtful loans remains low and strongly decreased
at 31 December 2023 representing 2% of the sector's outstandings
(versus 5.2% in 2022). As aircraft financing is a highly collateralised
business, stage 3 provisions are limited and represent EUR 58 million
at 31 December 2023, compared to EUR 111 million at 31 December
\u25a0 the commercial real estate sector:
The commercial real estate sector covers a set of segments with very
different dynamics: logistics, office real estate, residential, hotels,
shopping centers, but all segments are affected by rising rates which
are driving down valuations. The Group expects values to stabilise in
2024, but they will not return to their 2022 level until 2027, except
for the best assets. More specifically, the office sector is undergoing a
change in use following the widespread adoption of work-from-home
and some assets may experience a high vacancy rate. Overall, the
portfolio is predominantly investment grade.
At 31 December 2023, the gross exposure to the commercial real estate
sector is EUR 71.7 billion, (EUR 82.6 billion at 31 December 2022 o/w
EUR 11.2 billion in Bank of the West), i.e. 3.9% of the Group's total gross
on- and off-balance sheet commitments (4.2% of total commitments in
2022). This exposure is mainly in Europe and highly diversified between
the various market segments, countries and entities of the Group.
Defaulted assets represent 2.4% of the sector's total gross exposure
(compared to 1.5% in 2022). On commercial real estate, stage 3
provisions amounted to EUR 583 million as at 31 December 2023
(EUR 411 million as at 31 December 2022). The provisions for stages 1
and 2 amount to EUR 298 million at 31 December 2023, i.e. an exposure
(1) Gross credit risk exposures across all regulatory exposure classes. They amounted to EUR 1,829 billion at 31 December 2023.
The activity of this sector includes the generation, transportation, and
distribution of electricity.
A strong demand for electricity is expected in the coming years due
to the need for electrification of many economic sectors, particularly
as part of the decarbonisation of the economy.
The strong geopolitical tensions and the consequences of the Russia-
Ukraine conflict caused a sharp rise in electricity market prices in 2022,
mainly in Europe. In 2023, the decrease in prices has reduced clients'
need for liquidity, even though market volatility remains high due to
new geopolitical tensions.
To meet the future demand for electricity and the gradual phase-out
of fossil fuels, the \"Renewables\" segment will continue to expand,
but certain adjustments have been made necessary regarding the
economic parameters of new investments, in a context of inflation and
increased costs related to the development of these assets.
As at 31 December 2023, gross exposure to the electricity sector
amounted to EUR 55.2 billion (or 3.0% of the Group's total on- and
off-balance sheet gross exposure), compared with EUR 55.3 billion
as at 31 December 2022 (2.8% of gross exposure in 2022). 81% of
counterparties have good credit quality (investment grade rating), and
the amount of outstanding on doubtful customers is low, representing
0.7% of the sector as at 31 December 2023 (compared to 0.4% in 2022).
Stage 3 provisions amounted to EUR 87 million as at 31 December
2023 (compared to EUR 74 million last year).
The Group remains diversified, with no sector accounting for more than
10% of corporate lending exposure and more than 4.0% of total credit
exposure as at 31 December 2023.
At 31 December 2023, non-performing loans were stable compared to
31 December 2022, following the sale of Bank of the West and the sale
of doubtful portfolios in Italy and Personal Finance, offset by an increase
at CPBS in France and Global Banking Americas.
The main effects explaining changes in the amount of doubtful
outstandings in 2023 (EU CR2-B) are presented in note 5.f Impaired
financial assets (stage 3).
The cost of risk and the change in impairment in respect of credit risk
are presented in note 1.f.6 Cost of risk to the consolidated financial
The following table shows the carrying amounts of the financial assets
and commitments at amortised cost and fair value through equity subject
to impairment provisions for credit risk (i.e. excluding instruments at
fair value through profit and loss) broken down by stage of impairment
and by BNP Paribas internal rating in the prudential scope. Financial
assets subject to impairment are recognised in the following accounting
\u25a0 amounts due from central banks (excluding cash);
\u25a0 debt securities at fair value through equity or at amortised cost;
\u25a0 loans and advances at amortised cost;
\u25a0 financing and guarantee commitments given (off-balance sheet).
TABLE 52: BREAKDOWN OF FINANCIAL ASSETS SUBJECT TO IMPAIRMENT BY STAGE AND INTERNAL RATING [Audited]
BNP Paribas rating or equivalent
Debt securities at fair value
Loans and advances at amortised
Debt securities at amortised cost
Financial assets subject to impairments were down by EUR 99 billion, a
decrease of 5% compared to 31 December 2022. This change is mainly due
to the disposal of the activities of Bank of the West in the first quarter of
2023, for which outstandings amounted to EUR 80 billion on the balance
sheet (presented in \"Assets held for sale\") and EUR 22 billion in financing
and guarantee commitments (including EUR 6 billion rated 4 to 5 and
EUR 14 billion rated 6 to 8) at 31 December 2022.
Excluding the disposal of the Bank of the West activities, financial
assets subject to impairments were up by EUR 4 billion compared to
31 December 2022. This change mainly relates to financial assets and
commitments rated 6 to 8 (+EUR 6 billion), while financial assets and
commitments rated 9 to 10 decreased by EUR 2 billion.
Loans and receivables at amortised cost classified in stage 1 increased
by EUR 9 billion, while outstandings classified in stage 2 decreased by
EUR 14 billion, notably as a result of a less pronounced deterioration in
activity than initially anticipated during the first half of 2023 (see note
3.g Cost of risk in the notes to the consolidated financial statements).
Outstandings transferred from stage 2 to stage 1 mainly concern the
least risky outstandings among those previously classified in stage 2
(outstandings rated 4 to 5 and 6 to 8 notably).
RESTRUCTURED LOANS [AUDITED]
When a borrower is bordering on or is in financial difficulties, he may
receive a concession from the bank that would otherwise not have been
granted if the borrower had not met with financial difficulties. The
\u25a0 a change to the contract terms and conditions;
\u25a0 partial or total refinancing of the debt.
The loan is then said to be \"restructured\". It must retain the status
of \"restructured\" during a period of observation, known as a probation
period, for at least two years. The concept of restructuring is described
in the accounting principles (note 1.f.5 Impairment of financial assets
measured at amortised cost and debt instruments measured at fair value
through shareholders' equity to the consolidated financial statements
as at 31 December 2023) and is aligned with by Article 47 of Regulation
According to the principles for identifying the restructured exposure
amounts for the Group as a whole, for the non-retail business, exposures
are identified individually during the loan process, notably during
committees. As for restructured exposures for retail customers, they are
usually identified via a systematic process requiring the use of algorithms
whose parameters are validated by the RISK and Finance & Strategy
Information on restructured loans is reported to the supervisory authority
The following table shows the gross value and impairment amounts
of performing and non-performing loans that have been restructured.
TABLE 53: CREDIT QUALITY OF RESTRUCTURED LOANS (EU CQ1) [Audited]
changes in fair value due to
credit risk and provisions
Collaterals received and financial
The general model for impairment described in note 1.f.5 used by the
Group relies on the following two steps:
\u25a0 assessing whether there has been a significant increase in credit risk
since initial recognition; and
\u25a0 measuring impairment allowance as either 12-month expected credit
losses or lifetime expected credit loss (i.e. loss expected at maturity).
Both steps rely on forward-looking information.
Significant increase in credit risk
At 31 December 2022, BNP Paribas revised its criteria for assessing the
significant increase in credit risk in line with the recommendations issued
by the European Banking Authority and the European Central Bank.
Previously, except for the consumer credit specialist business, the credit
risk deterioration was mainly evaluated based on changes in the internal
credit rating, an indicator of the average 1-year probability of default
through the cycle. In order to fully consider forward-looking information,
the new criteria use the probability of default to maturity, which is derived
from the internal rating, incorporating the expected consequences of
changes in macroeconomic scenarios, as the main indicator.
Under these new criteria, credit risk is assumed to have significantly
increased, and the asset is classified in stage 2, if the probability of
default to maturity of the instrument has increased at least threefold
since its origination. This relative variation criterion is supplemented
by an absolute variation criterion of the default probability of 400 basis
Furthermore, for all portfolios (except for the consumer credit specialist
\u25a0 the facility is assumed to be in stage 1 when its 1-year \"Point in Time\"
probability of default (PiT PD) is below 0.3% at the reporting date, since
changes in probability of default due to credit downgrades in this zone
are not material, and therefore not considered \"significant\";
\u25a0 when the 1-year PiT PD is greater than 20% at the reporting date, given
the Group's credit issuance practices, the deterioration is considered
significant, and the facility is classified in stage 2 (as long as the facility
In the consumer credit specialist business, the existence of a payment
incident during the last 12 months, potentially regularised, is considered
to be an indication of significant increase in credit risk and the facility is
therefore classified in stage 2.
The table below shows a comparison between the previous and the new criteria for assessing the significant increase in credit risk:
One year probability of default* < 0.25%
* Probability of default through the cycle.
** \"Point in Time\" (PiT) probability of default including forward-looking.
One year PiT probability of default** < 0.3%
Deterioration from origination leading
Rating downgrade \u2265 6 notches
Rating downgrade \u2265 3 notches
One year probability of default > 10%
One year PiT probability of default> 20%
One year probability of default
One year probability of default at origination
Rating downgrade \u2265 6 notches
Lifetime PiT probability of default
Lifetime PiT probability of default at origination
Variation of lifetime PiT probability of default
since origination > 400 bps
Credit risk is assumed to have increased significantly since initial
recognition and the asset is classified in stage 2 in the event of late
payment of more than 30 days or restructuring due to financial difficulties
(as long as the facility is not credit-impaired). Since 31 December 2023,
performing corporate clients placed under credit watch are systematically
In the first half of 2022, the internal ratings of the Russian counterparties
(including the sovereign rating) were systematically downgraded to
take into account recent events, thus leading to the transfer of their
outstandings to stage 2. However, given the Group's limited level of
exposure to this country, this deterioration had no significant effect on
Forward-Looking Information
The Group considers forward-looking information both when assessing
significant increase in credit risk and when measuring Expected Credit
Regarding the measurement of expected credit losses, the Group has
chosen to use 4 macroeconomic scenarios by geographic area covering
a wide range of potential future economic conditions:
\u25a0 a baseline scenario, consistent with the scenario used for budgeting;
\u25a0 a favourable scenario, capturing situations where the economy
performs better than anticipated;
\u25a0 an adverse scenario, corresponding to the scenario used for the
Group's quarterly stress tests;
\u25a0 a severe scenario corresponding to a shock of magnitude greater than
that of the adverse scenario.
The link between the macroeconomic scenarios and the ECL measurement
is mainly achieved through a modelling of the probabilities of default
and deformation of migration matrices based on internal rating (or risk
parameter). The probabilities of default determined according to these
scenarios are used to measure expected credit losses in each of these
The Group's setup is broken down by sector to take into account the
heterogeneity of sectoral dynamics when assessing the probability of
Forward-looking information is also considered when determining the
significant deterioration in credit risk. As a matter of fact, the probabilities
of default used as the basis for this assessment include forward-looking
multi-scenario information in the same way as for the calculation of the
The weight to be attributed to the expected credit losses calculated in
each of the scenarios is defined as 50% for the baseline scenario, and:
\u25a0 the weight of the three alternative scenarios is defined according to
the position in the credit cycle. In this approach, the adverse scenario
carries more weight in situations at the upper end of the cycle than
those at the lower end of the cycle, in anticipation of a potential
\u25a0 the weight of the favourable scenario is at least 10% and at most 40%;
\u25a0 the total weight of adverse scenarios fluctuates symmetrically with the
favourable also within a range of 10% to 40%; with a severe component
representing 20% of this weight with a minimum weight of 5%.
When appropriate, the ECL measurement can take into account asset
The four macroeconomic scenarios are defined over a three-year
projection horizon. They correspond to:
\u25a0 a baseline scenario, which describes the most likely path of the
economy over the projection horizon. This scenario is updated on
a quarterly basis and is prepared by the Group Economic Research
Department in collaboration with various experts within the Group.
Projections are designed for each key market of the Group (France,
Italy, Belgium, the United States, and the Eurozone) using key
macroeconomic variables (Gross Domestic Product - GDP - and its
components, unemployment rate, consumer prices, interest rates,
foreign exchange rates, oil prices, real estate prices, etc.) which are key
drivers for modeling risk parameters used in the stress test process;
\u25a0 an adverse scenario, which describes the impact of the materialisation
of some of the risks weighing on the baseline scenario, resulting in a
much less favourable economic path than in the baseline scenario.
The GDP shock is applied with varying magnitudes, but simultaneously,
to the economies under consideration. Generally, these assumptions
are broadly consistent with those proposed by the regulators. The
calibration of shocks on other variables (e.g. unemployment, consumer
prices, interest rates, etc.) is based on models and expert judgment;
\u25a0 a severely adverse scenario, which is an aggravated version of the
\u25a0 a favourable scenario, which reflects the impact of the materialisation
of some of the upside risks for the economy, resulting in a more
favourable economic path. The favourable shock on GDP is deducted
from the structural adverse shock on GDP in such a way that the
probabilities of the two shocks are equal on average over the cycle.
Other variables (e.g. unemployment, inflation, interest rates, etc.) are
defined in the same way as in the adverse scenario.
The link between the macroeconomic scenarios and the measurement of
the ECL is complemented by an approach allowing to take into account
anticipation aspects not captured by the models in the generic approach.
This is particularly the case when unprecedented events in the historical
chronicle taken into account to build the models occur or are anticipated,
or when the nature or amplitude of change in macroeconomic parameter
calls into question past correlations. Thus, the situation of high inflation
and the current and projected level of interest rates correspond to aspects
not observed in the reference history. In this context, the Group has
developed an approach to take into account the future economic outlook
when assessing the financial strength of counterparties. This approach
involves projecting the impact of higher interest rates on customers'
financial ratios, notably considering their level of indebtedness. Credit
ratings and associated probabilities of default are revalued based on
these simulated financial ratios. This approach is also used to anticipate
the effect of lower prices of commercial properties.
Global activity decelerated in 2023, in a context of tight financial
conditions and still high inflation. Global GDP is expected to grow
by 2.8% on annual average (compared with 3.3% in 2022), mainly
reflecting weaker developments among European economies. In the
Eurozone, activity growth is expected to have decelerated to 0.5% in
2023 (while, at 30 June 2023, it was expected to reach 0.7%), reflecting
much less dynamic domestic demand (both in terms of consumption and
investment). The US economy has proved more resilient than initially
anticipated and is assumed to grow by 2.3% in 2023 (while, at 30 June
2023, it was expected to grow by only 0.9%). In 2024, economic conditions
are expected to be sluggish among advanced economies, with growth
rates slightly below 1% in both the Eurozone and the US.
While inflation has receded at a quite rapid pace in the course of 2023, it
has remained significantly above central bank targets in many countries.
This high inflation environment has pushed central banks to implement
the most pronounced monetary tightening in recent decades.
The main central banks (European Central Bank, US Federal Reserve) may
have completed their monetary policy tightening cycle by the end of 2023.
They are expected to keep their monetary stance broadly unchanged for a
few months. Both short-term and long-term interest rates have reached
levels not seen since the years 2000 and are expected to remain relatively
high for some time. Tight financial conditions should thus continue to
weigh on activity in 2024.
Adverse and severely adverse scenarios
The adverse and severely adverse scenarios are based on the assumption
that certain downside risks will materialise, resulting in much less
favourable economic paths than in the baseline scenario.
The following main risks are identified:
\u25a0 Geopolitical risks and globalisation developments. Geopolitical risks
have increased significantly in recent years, contributing to a fracturing
of the global economy. Geopolitical tensions can weigh on the global
economy through various channels, including shocks on commodity
prices, financial markets, business confidence, supply chains and
trade. Such developments are susceptible to lead simultaneously to
higher inflation developments and weaker activity, complicating the
task of central banks. The growing use of international sanctions also
increases the possible magnitude of consequences of such events;
\u25a0 A greater impact of tight monetary conditions. The marked tightening
of monetary policy in response to high inflation over past quarters
has led to much higher short-term and long-term interest rates
than in previous years. This has already weighed on activity, notably
through weaker developments in most interest rate sensitive sectors,
in particular the real estate sector. These negative consequences
could extend further given the usual delays between the increase in
rates and its effect on the economy. In a more unfavourable economic
context, tighter financial conditions, combined with weaker activity
developments could lead to weaker trends (than assumed in the
baseline scenario) regarding credit, investment, residential and
commercial real estate prices, and lead to higher default rates;
\u25a0 More fragile public finances. The fact that debt-to-GDP ratios are high
increases risks related to public finances in an environment of high
interest rates and weak growth. These combined developments could
give birth in some countries to market tensions (widening sovereign
bond spreads) and affect activity through several channels (higher
interest rates, reduced government spending, higher taxes).
The adverse and severe scenarios assume the materialisation of these
identified latent risks from the first quarter of 2024.
While downside risks are shared by the adverse and the severely adverse
scenarios, the impacts are assumed to be markedly higher in the severely
adverse scenario, due to both more pronounced direct shocks (e.g. higher
commodity prices) and the development of a negative spiral between key
driving factors (e.g. activity, public debt, bond yields, equity markets).
Among the considered countries, GDP levels in the adverse scenario stand
between 7.8% and 11.1% lower than in the baseline scenario at the end
of the shock period. In particular, this deviation reaches 9% on average
in both the Eurozone and the United States.
In the severe scenario, GDP levels stand between 11.6% and 16.2% lower
than in the baseline scenario at the end of the shock period. This deviation
reaches 13.2% in both the Eurozone and the United States.
Scenario weighting and cost of risk sensitivity
At 31 December 2023, the weight of the favourable scenario considered
by the Group was 33%, and 12% for the adverse scenario and 5% for
the severe scenario. At 31 December 2022, the weight of the favourable
scenario was 34% and 16% for the adverse scenario (the severe scenario
was introduced in the first half 2023).
The sensitivity of the amount of expected credit losses for all financial
assets at amortised cost or at fair value through equity and credit
commitments is assessed by comparing the estimated expected credit
losses resulting from the weighting of the above scenarios with that
resulting from each of the two alternative scenarios:
\u25a0 an increase in ECL of 23%, or EUR 1,150 million according to the
adverse scenario (22% at 31 December 2022);
\u25a0 a decrease in ECL of 12%, or EUR 600 million according to the
favourable scenario (7% at 31 December 2022).
Post-model adjustments are made when system limitations are
identified in a particular context, for instance, in the case of insufficient
statistical data to reflect the specific situation in the models. Post-model
adjustments are also considered to take into account, where applicable,
the consequences of climatic events on expected credit losses.
\u25a0 Adaptation of the ECL assessment process to factor in the specific
nature of the health crisis:
Conservative adjustments were taken into account when the models
used were based on indicators that show unusual levels in the context
of the health crisis and the support programmes, such as the increase
in deposits and the decrease in past due events for retail customers
For the consumer credit specialist business, a conservative adjustment
had been considered in 2020 for loans that benefitted from a
moratorium. In 2021, this adjustment was reversed in connection with
the satisfactory return to payment observed on these loans. However,
a conservative adjustment was made to compensate for the atypical
These post-model adjustments were reversed in 2022.
\u25a0 Adaptation of the ECL assessment process to factor in the significant
rise in inflation and in interest rates:
Additional adjustments were made in 2022 to take into account the
effects of inflation and interest rate hikes when this effect is not
directly estimated by the models. For example, within the consumer
credit specialist business, adjustments were considered for the
categories of customers most sensitive to the gradual decline in the
level of their net income.
Part of these adjustments were integrated into the models in 2022
and in the first half of 2023, leading to a decrease in the post-model
All of these adjustments represent 4.5% of the total amount of expected
credit losses at 31 December 2023, compared to 6.1% at 31 December 2022.
In 2023, the volume of financial assets at amortised cost was stable
compared to previous year and amounted to EUR 1,022 billion (see
note 5.e Financial assets at amortised cost) of which EUR 877 billion in
loans and advances to customers.
Loans and advances to customers classified in stage 1 increased by
EUR 15 billion over the year, while stage 2 outstandings decreased by
EUR 14 billion. This evolution mainly reflects a deterioration in activity
during the first half of 2023 that was less pronounced than in the forecasts
made for the 31 December 2022 closing. This situation is reflected both
in the consequences of the change in the GDP scenarios, and in the
effects of the interest rate increase projections on customers' financial
ratios, thus leading to the return to stage 1 of outstandings previously
transferred to stage 2 and to provision reversals without stage transfer.
The systematic classification into stage 2, for the corporate category, of
performing clients under credit watch as of 31 December 2023 led to
limited transfers of outstandings from stage 1 to stage 2.
Besides, in relation to the deterioration in activity, transfers to stage 3
for EUR 8.6 billion were higher than in 2022, particularly for corporate
clients (see note 5.f Impaired financial assets).
These combined effects led to a net reversal of impairment on stage 1
and 2 in 2023. The provisioning ratio for loans and advances to customers
classified in stage 2 remained stable at 3.2% at 31 December 2023.
Changes in impairment of financial assets at amortised cost during the previous period
Net allowance to impairment
Financial assets purchased or originated during the
Financial assets derecognised during the period(1)
Change in the significant increase in credit risk
Other allowances/reversals without stage transfer(2)
Impairment provisions used
Changes in exchange rates
Changes in scope of consolidation and other items
At 31 December 2022 restated according to IFRS 17 and 9
(2) Includingamortisation.
1.f.5 Impairmentof financial assets
measured at amortised cost and debt
instruments measured at fair value
through shareholders' equity
The impairment model for credit risk is based on expected losses.
This model applies to loans and debt instruments measured at amortised
cost or at fair value through equity, to loan commitments and financial
guarantee contracts that are not recognised at fair value, as well as to
lease receivables, trade receivables and contract assets.
The Group identifies three \"stages\" that each correspond to a specific
status with regards to the evolution of counterparty credit risk since the
initial recognition of the asset.
\u25a0 12-month expected credit losses (\"stage 1\"): if at the reporting
date, the credit risk of the financial instrument has not increased
significantly since its initial recognition, this instrument is impaired at
an amount equal to 12-month expected credit losses (resulting from
the risk of default within the next 12 months);
\u25a0 lifetime expected credit losses for non-impaired assets (\"stage 2\"):
the loss allowance is measured at an amount equal to the lifetime
expected credit losses if the credit risk of the financial instrument has
increased significantly since initial recognition but the financial asset
is not considered credit-impaired or doubtful;
\u25a0 lifetime expected credit losses for credit-impaired or doubtful financial
assets (\"stage 3\"): the loss allowance is also measured for an amount
equal to the lifetime expected credit losses.
This general model is applied to all instruments within the scope of IFRS 9
impairment, except for purchased or originated credit-impaired financial
assets and instruments for which a simplified model is used (see below).
The IFRS 9 expected credit loss approach is symmetrical, i.e. if lifetime
expected credit losses have been recognised in a previous reporting
period, and if it is assessed in the current reporting period that there is
no longer any significant increase in credit risk since initial recognition,
the loss allowance reverts to a 12-months expected credit loss.
As regards interest income, under \"stages\" 1 and 2, it is calculated on
the gross carrying amount. Under \"stage 3\", interest income is calculated
on the amortised cost (i.e. the gross carrying amount adjusted for the
The definition of default is aligned with the Basel regulatory default
definition, with a rebuttable presumption that the default occurs no
later than 90 days past due. This definition takes into account the EBA
guidelines of 28 September 2016, notably those regarding the thresholds
applicable for the counting of past-due and probation periods.
The definition of default is used consistently for assessing the increase
in credit risk and measuring expected credit losses.
Credit-impaired or doubtful financial assets
A financial asset is considered credit-impaired or doubtful and classified
in \"stage 3\" when one or more events that have a detrimental impact
on the estimated future cash flows of that financial asset have occurred.
At an individual level, objective evidence that a financial asset is credit-
impaired includes observable data regarding the following events: the
existence of accounts that are more than 90 days past due; knowledge
or indications that the borrower is experiencing significant financial
difficulties, such that a risk can be considered to have arisen regardless
of whether the borrower has missed any payments; concessions with
respect to the credit terms granted to the borrower that the lender would
not have considered had the borrower not been in financial difficulty
(see section Restructuring of financial assets for financial difficulties).
Specific cases of purchased or originated credit-impaired
In some cases, financial assets are credit-impaired at initial recognition.
For these assets, no loss allowance is recorded on initial recognition.
The effective interest rate is calculated taking into account the lifetime
expected credit losses in the initial estimated cash flows. Any change
in lifetime expected credit losses since initial recognition, positive or
negative, is recognised as a loss allowance adjustment in profit or loss.
The simplified approach consists in accounting for a loss allowance
corresponding to lifetime expected credit losses since initial recognition,
and at each reporting date.
The Group applies this model to trade receivables with a maturity shorter
Significant increase in credit risk
A significant increase in credit risk may be assessed on an individual basis
or on a collective basis (by grouping financial instruments according to
common credit risk characteristics), taking into account all reasonable
and supportable information and comparing the risk of default of the
financial instrument at the reporting date with the risk of default of the
financial instrument at the date of initial recognition.
Assessment of deterioration is based on the comparison of the
probabilities of default derived from the ratings on the date of initial
recognition with those existing at the reporting date.
There is also, according to the standard, a rebuttable presumption that
the credit risk of an instrument has significantly increased since initial
recognition when the contractual payments are more than 30 days past
In the consumer credit specialist business, a significant increase in credit
risk is also considered when a past due event has occurred within the
last 12 months, even if it has since been regularised.
The principles applied to assess the significant increase in credit risk are
detailed in note 3.g Cost of risk.
A write-off consists in reducing the gross carrying amount of a financial
asset when there are no longer reasonable expectations of recovering
that financial asset in its entirety or a portion thereof, or when it has
been fully or partially forgiven. The write-off is recorded when all other
means available to the Bank for recovering the receivables or guarantees
have failed, and also generally depends on the context specific to each
If the amount of loss on write-off is greater than the accumulated loss
allowance, the difference is recognised as an additional impairment loss
in \"Cost of risk\". For any recovery once the financial asset (or part thereof)
is no longer recognised on the balance sheet, the amount received is
recorded as a gain in \"Cost of risk\".
Recoveries through the repossession
When a loan is secured by a financial or a non-financial asset serving as
a guarantee and the counterparty is in default, the Group may decide to
exercise the guarantee and, depending on the jurisdiction, it may then
become owner of the asset. In such a situation, the loan is written-off
against the asset received as collateral.
Once ownership of the asset is effective, it is recognised at fair value and
classified according to the intent of use.
Restructuring of financial assets for financial
A restructuring due to the borrower's financial difficulties is defined as
a change in the terms and conditions of the initial transaction that the
Group is considering only for economic or legal reasons related to the
borrower's financial difficulties.
For restructurings not resulting in derecognition of the financial asset, the
restructured asset's gross carrying amount is reduced to the discounted
amount, using the original effective interest rate of the asset, of the new
expected future flows. The change in the gross carrying amount of the
asset is recorded in the income statement in \"Cost of risk\".
The existence of a significant increase in credit risk for the financial
instrument is then assessed by comparing the risk of default after the
restructuring (under the revised contractual terms) and the risk of default
at the initial recognition date (under the original contractual terms). In
order to demonstrate that the criteria for recognising lifetime expected
credit losses are no longer met, good payment behaviour will have to be
observed over a certain period of time.
When the restructuring consists of a partial or total exchange against
other substantially different assets (for example, the exchange of a debt
instrument against an equity instrument), it results in the extinction of
the original asset and the recognition of the assets remitted in exchange,
measured at their fair value at the date of exchange. The difference in
value is recorded in the income statement in \"Cost of risk\".
Modifications to financial assets that are not due to a borrower's financial
difficulties, or granted in the context of a moratorium (i.e. commercial
renegotiations) are generally analysed as the early repayment of the
former loan, which is then derecognised, followed by the set-up of a new
loan at market conditions. If there is no significant repayment penalty,
they consist in resetting the interest rate of the loan at market conditions,
with the client being in a position to change lender and not encountering
any financial difficulties.
The Group applies observation periods to assess the possible return to
a better stage. Accordingly, a 3-month probation period is observed for
the transition from stage 3 to stage 2 which is extended to 12 months
in the event of restructuring due to financial difficulties.
For the transition from stage 2 to stage 1, a probation period of two
years is observed for loans that have been restructured due to financial
Cost of risk includes the following items of profit or loss:
\u25a0 impairment gains and losses resulting from the accounting of loss
allowances for 12-month expected credit losses and lifetime expected
credit losses (\"stage 1\" and \"stage 2\") relating to debt instruments
measured at amortised cost or at fair value through shareholders'
equity, loan commitments and financial guarantee contracts that are
not recognised at fair value as well as lease receivables, contract
assets and trade receivables;
\u25a0 impairment gains and losses resulting from the accounting of loss
allowances relating to financial assets (including those at fair
value through profit or loss) for which there is objective evidence of
impairment (\"stage 3\"), write-offs on irrecoverable loans and amounts
recovered on loans written-off.
It also includes expenses relating to fraud and to disputes inherent to
3.c NET GAIN ON FINANCIAL INSTRUMENTS
AT FAIR VALUE THROUGH PROFIT
Net gain on financial instruments measured at fair value through profit
or loss includes all profit and loss items relating to financial instruments
held for trading, financial instruments that the Group has designated as
at fair value through profit or loss, non-trading equity instruments that
the Group did not choose to measure at fair value through equity, as
well as debt instruments whose cash flows are not solely repayments
of principal and interest on the principal or whose business model is
not to collect cash flows nor to collect cash flows and sell the assets.
These income items include dividends on these instruments and exclude
interest income and expense from financial instruments designated as
at fair value through profit or loss and instruments whose cash flows
are not only repayments of principal and interest on the principal or
whose business model is not to collect cash flows nor to collect cash
flows and sell the assets, which are presented in \"Net interest income\"
Financial instruments held for trading
Interest rate and credit instruments
Equity financial instruments
Foreign exchange financial instruments
Loans and repurchase agreements
Other financial instruments
Financial instruments designated as at fair value through profit or loss
Other financial instruments at fair value through profit or loss
Impact of hedge accounting
Fair value hedging derivatives
Hedged items in fair value hedge
NET GAIN ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
5.a FINANCIAL INSTRUMENTS AT FAIR
VALUE THROUGH PROFIT OR LOSS
Financial assets and liabilities at fair value
Financial assets and financial liabilities at fair value through profit or
loss consist of held-for-trading transactions - including derivatives, of
certain liabilities designated by the Group as at fair value through profit
or loss at the time of issuance and of non-trading instruments whose
characteristics prevent their accounting at amortised cost or at fair value
restated according to IFRS 17 and 9
instruments throughprofit valuethrough
instruments throughprofit valuethrough
Loans and repurchase agreements
FINANCIAL ASSETS AT FAIR VALUE
Deposits and repurchase agreements
Issued debt securities (note 5.h)
of which subordinated debt
of which non subordinated debt
FINANCIAL LIABILITIES AT FAIR VALUE
Detail of these assets and liabilities is provided in note 5.d.
Financial liabilities designated as at fair value
Financial liabilities at fair value through profit or loss mainly consist of
issued debt securities, originated and structured on behalf of customers,
where the risk exposure is managed in combination with the hedging
strategy. These types of issued debt securities contain significant
embedded derivatives, which changes in value may be compensated by
changes in the value of economic hedging derivatives.
The redemption value of debt issued and designated as at fair value
through profit or loss at 31 December 2023 was EUR 89,910 million (EUR
71,721 million at 31 December 2022).
Other financial assets measured at fair value
Other financial assets at fair value through profit or loss are financial
assets not held for trading:
\u25a0 debt instruments that do not meet the criteria defined by IFRS 9 to
be classified as financial instruments at \"fair value through equity\"
or at \"amortised cost\":
their business model is not to \"collect contractual cash flows\" nor
\"collect contractual cash flows and sell the instruments\", and/or
their cash flows are not solely repayments of principal and interest
on the principal amount outstanding;
\u25a0 equity instruments that the Group did not choose to classify as at \"fair
Derivative financial instruments
The majority of derivative financial instruments held for trading are
related to transactions initiated for trading purposes. They may result
from market-making or arbitrage activities. BNP Paribas actively trades
in derivatives. Transactions include trades in \"ordinary\" instruments such
as credit default swaps, and structured transactions with complex risk
profiles tailored to meet the needs of its customers. The net position is
in all cases subject to limits.
Some derivative instruments are also contracted to hedge financial assets
or financial liabilities for which the Group has not documented a hedging
relationship, or which do not qualify for hedge accounting under IFRS.
1.f.7 Financialinstruments at fair value
Trading portfolio and other financial assets
measured at fair value through profit or loss
The trading portfolio includes instruments held for trading (trading
transactions), including derivatives.
Other financial assets measured at fair value through profit or loss
include debt instruments that do not meet the \"collect\" or \"collect
and sale\" business model criterion or that do not meet the cash flow
criterion, as well as equity instruments for which the fair value through
shareholders' equity option has not been retained. Finally financial assets
may be designated as at fair value through profit or loss if this enables the
entity to eliminate or significantly reduce a mismatch in the measurement
and accounting treatment of assets and liabilities that would otherwise
arise if they were to be classified in separate categories.
All those financial instruments are measured at fair value at initial
recognition, with transaction costs directly posted in profit or loss. At the
reporting date, they are measured at fair value, with changes presented
in \"Net gain/loss on financial instruments at fair value through profit
or loss\". Income, dividends, and realised gains and losses on disposal
related to held-for-trading transactions are accounted for in the same
Debt securities and subordinated debt
Debt securities and subordinated debt are measured at amortised cost
unless they are recognised at fair value through profit or loss.
Debt securities are initially recognised at the issue value including
transaction costs and are subsequently measured at amortised cost
using the effective interest method.
Issued bonds redeemable or convertible into own equity may contain
a debt component and an equity component, determined upon initial
recognition of the transaction. In this case, they will be qualified as
compound financial instruments.
In this respect, the Group has elected to record contingent convertible
bonds issued, without maturity, when convertible into a variable number
of own shares on the occurrence of a predetermined trigger event (e.g.
a decrease in the solvency ratio below a threshold), as compound
instruments, to the extent that the coupons on these bonds are paid
The term \"own equity instruments\" refers to shares issued by the parent
company (BNP Paribas SA) and by its fully consolidated subsidiaries.
External costs that are directly attributable to an issue of new shares
are deducted from equity net of all related taxes.
Own equity instruments held by the Group, also known as treasury
shares, are deducted from consolidated shareholders' equity irrespective
of the purpose for which they are held. Gains and losses arising on such
instruments are eliminated from the consolidated profit and loss account.
When the Group acquires equity instruments issued by subsidiaries
under the exclusive control of BNP Paribas, the difference between the
acquisition price and the share of net assets acquired is recorded in
retained earnings attributable to BNP Paribas shareholders. Similarly, the
liability corresponding to put options granted to minority shareholders
in such subsidiaries, and changes in the value of that liability, are offset
against minority interests, with any surplus offset against retained
earnings attributable to BNP Paribas shareholders. Until these options
have been exercised, the portion of net income attributable to minority
interests is allocated to minority interests in the profit and loss account.
A decrease in the Group's interest in a fully consolidated subsidiary is
recognised in the Group's accounts as a change in shareholders' equity.
Financial instruments issued by the Group and classified as equity
instruments (e.g. undated super subordinated notes) are presented in
the balance sheet in \"Capital and retained earnings\".
Distributions from a financial instrument classified as an equity
instrument are recognised directly as a deduction from equity. Similarly,
the transaction costs of an instrument classified as equity are recognised
as a deduction from shareholders' equity.
Own equity instrument derivatives are treated as follows, depending on
the method of settlement:
\u25a0 as equity instruments if they are settled by physical delivery of a fixed
number of own equity instruments for a fixed amount of cash or other
financial asset. Such instruments are not revalued;
\u25a0 as derivatives if they are settled in cash or by choice by physical
delivery of the shares or in cash. Changes in value of such instruments
are taken to the profit and loss account.
If the contract includes an obligation, whether contingent or not, for the
bank to repurchase its own shares, the bank recognises the debt at its
present value with an offsetting entry in shareholders' equity.
Interest rate risk and foreign exchange risk management strategies are described in chapter 5 \u2013 Pillar 3 of the Universal registration document
(section 5.7 \u2013 Market risk \u2013 Market risk related to banking activities). Quantitative information related to foreign currency borrowings used for net
investment hedges is also mentioned in this chapter.
The table below presents the detail of fair value hedge relationships for identified financial instruments and portfolios of financial instruments that
are continuing at 31 December 2023:
amounts fairvalue fairvalue
Fair value hedges of identified
Interest rate derivatives hedging
the interest rate risk related to
Foreign exchange derivatives
hedging the interest rate and
foreign exchange risks related to
Interest rate risk hedged
Interest rate derivatives hedging
the interest rate risk related to(1)
Foreign exchange derivatives
hedging the interest rate and
foreign exchange risks related to
(1) Areincluded in this section the notional amounts of hedging derivatives and of swaps that reverse the interest rate positions, thus reducing the hedge
relationship, when the hedged item still exists, for respectively EUR 93,839 million for derivatives hedging loans and receivables and EUR 177,833 million
for derivatives hedging deposits.
The table below presents the detail of fair value hedge relationships for identified financial instruments and portfolios of financial instruments that
are continuing at 31 December 2022:
restated according to IFRS 17 and 9
amounts fairvalue fairvalue
Fair value hedges of identified
Interest rate derivatives hedging
the interest rate risk related to
Foreign exchange derivatives
hedging the interest rate and
foreign exchange risks related to
Interest rate risk hedged
Interest rate derivatives hedging
the interest rate risk related to(1)
Foreign exchange derivatives
hedging the interest rate and
foreign exchange risks related to
(1) Areincluded in this section the notional amounts of hedging derivatives and of swaps that reverse the interest rate positions, thus reducing the hedge
relationship, when the hedged item still exists, for respectively EUR 121,183 million for derivatives hedging loans and receivables and EUR 103,261 million
for derivatives hedging deposits.
An asset or a liability or set of assets and liabilities, can be hedged over
several periods of time with different derivative financial instruments.
Besides, some hedges are achieved by the combination of two derivative
instruments. In this case, the notional amounts add up and their total
amount is higher than the hedged amount. The first situation is observed
more particularly for interest rate risk hedged portfolios and the second
for hedges of issued debt securities.
As regards discontinued fair value hedge relationships where the
derivative contract was terminated, the cumulated amount of
revaluation remaining to be amortised over the residual life of the hedged
instruments amounts to EUR 1,143 million in assets at 31 December
2023, and to -EUR 166 million in liabilities, for hedges of portfolios
of financial instruments. At 31 December 2022, these amounts were
EUR 1,399 million in assets and -EUR 138 million in liabilities.
Regarding hedges of identified instruments, the cumulated amount of
revaluation remaining to be amortised over the residual life of the hedged
instruments amounts to EUR 105 million in assets at 31 December 2023.
At 31 December 2022, this amount was EUR 111 million in assets.
The notional amount of cash flow hedge derivatives is EUR 241,125 million
at 31 December 2023. Changes in assets and liabilities recognised directly
in equity amount to EUR 189 million. At 31 December 2022, the notional
amount of cash flow hedge derivatives was EUR 213,866 million and
changes in assets and liabilities recognised directly in equity amounted
Cash flow hedges are particularly used to hedge interest rate risk on
floating-rate assets and liabilities, including rollovers, and foreign
exchange risks on highly probable forecast foreign currency revenues.
At the inception of the hedge, the Group prepares formal documentation
which details the hedging relationship, identifying the instrument, or
portion of the instrument, or portion of risk that is being hedged, the
hedging strategy and the type of risk hedged, the hedging instrument, and
the methods used to assess the effectiveness of the hedging relationship.
On inception and at least quarterly, the Group assesses, in consistency
with the original documentation, the actual (retrospective) and expected
(prospective) effectiveness of the hedging relationship. Retrospective
effectiveness tests are designed to assess whether the ratio of actual
changes in the fair value or cash flows of the hedging instrument to
those in the hedged item is within a range of 80% to 125%. Prospective
effectiveness tests are designed to ensure that expected changes in the
fair value or cash flows of the derivative over the residual life of the hedge
adequately offset those of the hedged item. For highly probable forecast
transactions, effectiveness is assessed largely on the basis of historical
data for similar transactions.
Under IAS 39 as adopted by the European Union, which excludes certain
provisions on portfolio hedging, interest rate risk hedging relationships
based on portfolios of assets or liabilities qualify for fair value hedge
\u25a0 the risk designated as being hedged is the interest rate risk associated
with the interbank rate component of interest rates on commercial
banking transactions (loans to customers, savings accounts and
\u25a0 the instruments designated as being hedged correspond, for each
maturity band, to a portion of the interest rate gap associated with
\u25a0 the hedging instruments used consist exclusively of \"plain vanilla\"
\u25a0 prospective hedge effectiveness is established by the fact that all
derivatives must, on inception, have the effect of reducing interest
rate risk in the portfolio of hedged underlying. Retrospectively, a hedge
will be disqualified from hedge accounting once a shortfall arises in the
underlying specifically associated with that hedge for each maturity
band (due to prepayment of loans or withdrawals of deposits).
The accounting treatment of derivatives and hedged items depends on
In a fair value hedging relationship, the derivative instrument is
remeasured at fair value in the balance sheet, with changes in fair value
recognised in profit or loss in \"Net gain/loss on financial instruments at
fair value through profit or loss\", symmetrically with the remeasurement
of the hedged item to reflect the hedged risk. In the balance sheet, the
fair value remeasurement of the hedged component is recognised in
accordance with the classification of the hedged item in the case of
a hedge of identified assets and liabilities, or under \"Remeasurement
adjustment on interest rate risk hedged portfolios\" in the case of a
portfolio hedging relationship.
If a hedging relationship ceases or no longer fulfils the effectiveness
criteria, the hedging instrument is transferred to the trading book and
accounted for using the treatment applied to this category. In the case
of identified fixed-income instruments, the remeasurement adjustment
recognised in the balance sheet is amortised at the effective interest
rate over the remaining life of the instrument. In the case of interest
rate risk hedged fixed-income portfolios, the adjustment is amortised
on a straight-line basis over the remainder of the original term of the
hedge. If the hedged item no longer appears in the balance sheet, in
particular due to prepayments, the adjustment is taken to the profit and
loss account immediately.
In a cash flow hedging relationship, the derivative is measured at
fair value in the balance sheet, with changes in fair value taken to
shareholders' equity on a separate line, \"Changes in fair value recognised
directly in equity\". The amounts taken to shareholders' equity over the
life of the hedge are transferred to the profit and loss account under
\"Net interest income\" as and when the cash flows from the hedged item
impact profit or loss. The hedged items continue to be accounted for using
the treatment specific to the category to which they belong.
If the hedging relationship ceases or no longer fulfils the effectiveness
criteria, the cumulative amounts recognised in shareholders' equity as
a result of the remeasurement of the hedging instrument remain in
equity until the hedged transaction itself impacts profit or loss, or until
it becomes clear that the transaction will not occur, at which point they
are transferred to the profit and loss account.
If the hedged item ceases to exist, the cumulative amounts recognised in
shareholders' equity are immediately taken to the profit and loss account.
Whatever the hedging strategy used, any ineffective portion of the hedge
is recognised in the profit and loss account under \"Net gain/loss on
financial instruments at fair value through profit or loss\".
Hedges of net foreign currency investments in subsidiaries and branches
are accounted for in the same way as cash flow hedges. Hedging
instruments may be foreign exchange derivatives or any other non-
derivative financial instrument.
MEASUREMENT OF THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The criteria for allocating instruments to each level of the fair value hierarchy, the measurement methods, and the principles governing transfers
between levels are those presented in note 5.d for the Group's financial instruments.
restated according to IFRS 17 and 9
Financial assets designated as at fair
value through profit or loss
Financial assets at fair value through
Derivative financial instruments
FINANCIAL ASSETS MEASURED
Financial liabilities designated at fair
value through profit or loss
Deposit at fair value through profit or loss
Debt representative of shares of
consolidated funds held by third parties
Investment contracts without
discretionary participation feature - Unit-
Derivative financial instruments
FINANCIAL LIABILITIES MEASURED
Level 1 includes notably equity securities and liquid bonds, derivative instruments traded on organised markets (futures, options, etc.), shares of funds
and UCITS, for which the net asset value is calculated on a daily basis.
Level 2 includes equity securities, government bonds, corporate debt securities, shares of funds and UCITS, and over-the-counter derivatives.
Level 3 includes units of funds and unlisted equity shares which are mainly company shares and venture capital.
The unit of measurement is the individual financial asset or financial
liability but a portfolio-based measurement can be elected, subject to
certain conditions. Accordingly, the Group retains this portfolio-based
measurement exception to determine the fair value when some group
of financial assets and financial liabilities and other contracts within the
scope of the standard relating to financial instruments with substantially
similar and offsetting market risks or credit risks is managed on the basis
of a net exposure, in accordance with the documented risk management
Assets and liabilities measured or disclosed at fair value are categorised
into the three following levels of the fair value hierarchy:
\u25a0 Level 1: fair values are determined using directly quoted prices in
active markets for identical assets and liabilities. Characteristics of
an active market include the existence of a sufficient frequency and
volume of activity and of readily available prices;
\u25a0 Level 2: fair values are determined based on valuation techniques for
which significant inputs are observable market data, either directly
or indirectly. These techniques are regularly calibrated and the inputs
are corroborated with information from active markets;
\u25a0 Level 3: fair values are determined using valuation techniques for
which significant inputs are unobservable or cannot be corroborated
by market-based observations, due for instance to illiquidity of the
instrument and significant model risk. An unobservable input is a
parameter for which there are no market data available and that
is therefore derived from proprietary assumptions about what other
market participants would consider when assessing fair value. The
assessment of whether a product is illiquid or subject to significant
model risks is a matter of judgment.
The level in the fair value hierarchy within which the asset or liability
is categorised in its entirety is based upon the lowest level input that is
significant to the entire fair value.
For financial instruments disclosed in Level 3 of the fair value hierarchy,
and marginally some instruments disclosed in Level 2, a difference
between the transaction price and the fair value may arise at initial
recognition. This \"Day One Profit\" is deferred and released to the profit
and loss account over the period during which the valuation parameters
are expected to remain non-observable. When parameters that were
originally non-observable become observable, or when the valuation can
be substantiated in comparison with recent similar transactions in an
active market, the unrecognised portion of the day one profit is released
to the profit and loss account.
1.f.11 Derecognitionof financial assets
and financial liabilities
Derecognition of financial assets
The Group derecognises all or part of a financial asset when the
contractual rights to the cash flows of the asset expire, or when the Group
transfers the asset \u2013 either on the basis of a transfer of the contractual
rights to its cash flows, or by retaining the contractual rights to receive
the cash flows of the asset while assuming an obligation to pay the cash
flows of the asset under an eligible pass-through arrangement \u2013 as well
as substantially all the risks and rewards of the asset.
Where the Group has transferred the cash flows of a financial asset
but has neither transferred nor retained substantially all the risks and
rewards of ownership of the financial asset and has not in practice
retained control of the financial asset, the Group derecognises the
financial asset and then records separately, if necessary, an asset or
liability representing the rights and obligations created or held as part of
the transfer of the asset. If the Group has retained control of the financial
asset, it maintains it on its balance sheet to the extent of its continuing
involvement in that asset.
Upon the derecognition of a financial asset in its entirety, a gain or loss
on disposal is recognised in the profit and loss account for an amount
equal to the difference between the carrying amount of the asset and the
value of the consideration received, adjusted where appropriate for any
unrealised gain or loss previously recognised directly in equity.
If all these conditions are not met, the Group retains the asset in its
balance sheet and recognises a liability for the obligations arising on
the transfer of the asset.
Derecognition of financial liabilities
The Group derecognises all or part of a financial liability when the
liability is extinguished, i.e. when the obligation specified in the contract
is extinguished, cancelled or expired. A financial liability may also be
derecognised in the event of a substantial change in its contractual terms
or if exchanged with the lender for an instrument with substantially
different contractual terms.
Repurchase agreements and securities lending/
Securities temporarily sold under repurchase agreements continue to
be recognised in the Group's balance sheet in the category of securities
to which they belong. The corresponding liability is recognised at
amortised cost under the appropriate \"Financial liabilities at amortised
cost\" category on the balance sheet, except in the case of repurchase
agreements contracted for trading purposes, for which the corresponding
liability is recognised in \"Financial liabilities at fair value through profit
Securities temporarily acquired under reverse repurchase agreements are
not recognised in the Group's balance sheet. The corresponding receivable
is recognised at amortised cost under the appropriate \"Financial assets
at amortised cost\" category in the balance sheet, except in the case
of reverse repurchase agreements contracted for trading purposes, for
which the corresponding receivable is recognised in \"Financial assets at
fair value through profit or loss\".
Securities lending transactions do not result in derecognition of the
lent securities, and securities borrowing transactions do not result in
recognition of the borrowed securities on the balance sheet. In cases
where the borrowed securities are subsequently sold by the Group, the
obligation to deliver the borrowed securities on maturity is recognised
on the balance sheet under \"Financial liabilities at fair value through
The accounting classification of securitisation positions in the banking
book is shown in Table 9:Prudential balance sheet by risk type (EU LI1-B).
Securitisation positions classified as \"Financial assets at amortised cost\"
are measured using the method described in note 1.f.1 Financial assets
at amortised cost to the consolidated financial statements: the effective
interest rate used to recognise interest income is measured on the basis
of an expected cash flow model. From the outset, these positions are
subject to an impairment calculation for expected credit risk losses (see
note 1.f.5Impairment of financial assets measured at amortised cost and
debt instruments measured at fair value through shareholders' equity
to the consolidated financial statements).
Securitisation positions classified on an accounting basis as \"Financial
assets at fair value through equity\" are measured using the method
described in note 1.f.2 Financial assets at fair value through shareholders'
equity to the consolidated financial statements. Changes in fair value
determined according to the principles listed in note 1.f.10 Determination
of fair value to the consolidated financial statements (excluding revenue
recognised using the effective interest method) are presented in a specific
subsection of shareholders' equity along with expected credit risk
losses calculated using the methods described in note 1.f.5 Impairment
of financial assets measured at amortised cost and debt instruments
measured at fair value through shareholders' equity to the consolidated
financial statements. Upon disposal, amounts previously recognised in
recyclable equity are transferred to the profit and loss account.
Securitisation positions classified on an accounting basis as \"Financial
instruments at fair value through profit or loss\" are measured using the
method described in note 1.f.7 Financial instruments at fair value through
profit or loss to the consolidated financial statements.
Proceeds from the sale of securitisation positions are recognised in
accordance with rules for the category of origin of positions sold.
Synthetic securitisations in the form of credit derivatives (credit default
swaps) or guarantees received follow accounting rules appertaining
\u25a0 to trading portfolio derivatives. These are measured at fair value
through profit or loss (see note 1.f.7 Financial instruments at fair
value through profit or loss to the consolidated financial statements);
\u25a0 to financial guarantees received, which cannot be considered as
forming an integral part of secured assets. If it is virtually certain
that a loss caused by a defaulting debtor will be offset by the guarantor,
the guarantee is then recognised as a reimbursement asset (right
to reimbursement for expected credit losses) and expected credit
losses on the asset are, at the same time, recognised in profit or
loss. The overall impact in terms of profit or loss is the same as if
the guarantee had been recognised in the measurement of expected
credit losses, with the difference that the guarantee received is shown
as a reimbursement asset rather than as a reduction in the expected
credit losses on the asset.
Assets awaiting securitisation are classified as:
\u25a0 financial instruments at amortised cost or at fair value through equity
and in the prudential banking book in the case of exposures resulting
from the Bank's balance sheet, for which the Bank will be originator
in the future securitisation within the meaning of Basel 3;
\u25a0 financial instruments at fair value through profit or loss and in the
prudential banking book in the case of exposures purchased and put
into warehousing, for which the Bank will be sponsor in the future
securitisation within the regulatory meaning.
Repurchase agreements and securities lending/
Securities temporarily sold under repurchase agreements continue to
be recognised in the Group's balance sheet in the category of securities
to which they belong. The corresponding liability is recognised at
amortised cost under the appropriate \"Financial liabilities at amortised
cost\" category on the balance sheet, except in the case of repurchase
agreements contracted for trading purposes, for which the corresponding
liability is recognised in \"Financial liabilities at fair value through profit
Securities temporarily acquired under reverse repurchase agreements are
not recognised in the Group's balance sheet. The corresponding receivable
is recognised at amortised cost under the appropriate \"Financial assets
at amortised cost\" category in the balance sheet, except in the case
of reverse repurchase agreements contracted for trading purposes, for
which the corresponding receivable is recognised in \"Financial assets at
fair value through profit or loss\".
Securities lending transactions do not result in derecognition of the
lent securities, and securities borrowing transactions do not result in
recognition of the borrowed securities on the balance sheet. In cases
where the borrowed securities are subsequently sold by the Group, the
obligation to deliver the borrowed securities on maturity is recognised
on the balance sheet under \"Financial liabilities at fair value through
Contracts not measured under the premium allocation approach
Changes in the liability for remaining coverage
Change in the risk adjustment
Contractual service margin
Recovery of insurance acquisition cash flows
Contracts measured under the premium allocation approach
Incurred claims and expenses
Amortisation of insurance acquisition cash flows
Changes that relate to past service
Loss component recognised in profit or loss
Net expenses from reinsurance contracts held
Insurance service expenses
\"Financial Result\" includes \"Investment return\" and \"Net finance income
or expenses from insurance contracts.\"
\"Investment return\" includes net income from financial instruments and
from investment properties.
\"Changes in fair value of underlying items of direct participation
contracts\" reflects the changes in value of underlying investments for
the amount which was not recognised directly in equity, and excluding
the portion of these changes adjusting the contract service margin.
\"Other insurance financial expenses\" measured under the general
model and under the simplified model represent the change in technical
liabilities arising from financial risks (discount rates variations, forex
rates, time value and financial variations expected in the contracts) for
the amount which was not recognised directly in equity.
Net gain on financial instruments at fair value through equity
Net gain on debt instruments
Dividend income on equity instruments
Net gain on financial instruments at fair value through profit or loss
Investment property income
Share of earnings of equity-method investments
Changes in fair value of underlying items of direct participation contracts
Other insurance financial expenses
Net finance income or expenses from insurance contracts
Tables below show movements in carrying amounts of insurance contracts and do not include reinsurance contracts held.
MOVEMENTS IN CARRYING AMOUNTS OF INSURANCE CONTRACTS - REMAINING COVERAGE AND INCURRED CLAIMS
Insurance contracts issued, excluding reinsurance
NET (ASSETS) OR LIABILITIES AT 1 JANUARY 2022
Insurance service result: (income) or expenses
of which insurance revenue
of which insurance service expenses
of which investment component
Net finance (income) or expenses from insurance
Total changes recognised in profit and loss and in equity
Premiums received for insurance contracts issued
Insurance acquisition cash flows
Claims and other service expenses paid
NET (ASSETS) OR LIABILITIES AT 31 DECEMBER 2022(1)
Insurance service result: (income) or expenses
of which insurance revenue
of which insurance service expenses
of which investment component
Net finance (income) or expenses from insurance
Total changes recognised in profit and loss and in equity
Premiums received for insurance contracts issued
Insurance acquisition cash flows
Claims and other service expenses paid
NET (ASSETS) OR LIABILITIES AT 31 DECEMBER 2023(1)
(1) Includingreceivables and liabilities attributable to insurance contracts for a net asset of EUR 549 million at 31 December 2023, compared to a net asset of
EUR 501 million at 31 December 2022.
(2) Includingfinance income and expenses recognised directly in equity.
MOVEMENTS IN CARRYING AMOUNTS OF INSURANCE CONTRACTS NOT MEASURED UNDER THE PREMIUM
ALLOCATION APPROACH \u2013 ANALYSIS BY MEASUREMENT COMPONENT
Insurance contracts issued not measured under the
premium allocation approach, excluding reinsurance
NET (ASSETS) OR LIABILITIES AT 1 JANUARY 2022
Insurance service result: (income) or expenses
of which changes related to future services - new
of which changes related to future services - change
of which changes related to current service(2)
of which changes related to past service
Net finance (income) or expenses from insurance
Total changes recognised in profit and loss and in equity
Premiums received for insurance contracts issued
Insurance acquisition cash flows
Claims and other service expenses paid
NET (ASSETS) OR LIABILITIES AT 31 DECEMBER 2022(1)
Insurance service result: (income) or expenses
of which changes related to future services - new
of which changes related to future services - change
of which changes related to current service(2)
of which changes related to past service
Net finance (income) or expenses from insurance
Total changes recognised in profit and loss and in equity
Premiums received for insurance contracts issued
Insurance acquisition cash flows
Claims and other service expenses paid
NET (ASSETS) OR LIABILITIES AT 31 DECEMBER 2023(1)
(1) Includingreceivables and liabilities attributable to insurance contracts for a net asset of EUR 501 million at 31 December 2023, compared to a net asset of
EUR 504 million at 31 December 2022.
(2) Includingan experience adjustment that amounted to +EUR 38 million for the year ended 2023 and to -EUR 33 million for the year ended 2022.
(3) Includingfinance income and expenses recognised directly in equity.
EXPECTED AMORTISATION SCHEDULE FOR THE CONTRACTUAL SERVICE MARGIN
The schedule presents the amortisation of the contractual service margin to be recognised over time in profit or loss for protection contracts under the
general model and for saving contracts under the variable fee approach. For the latter, it considers the over performance of financial assets compared
to a risk-neutral measurement.
DISCOUNT RATES AND ADJUSTMENT FOR NON-FINANCIAL RISK
The table below presents the average discount rates used in the measurement of savings and protection contracts for the main horizons of the euro curve.
restated according to IFRS 17 and 9
The difference between the Savings and Protection yield curves is equal
to that of their respective illiquidity premium.
\u25a0 For savings contracts measured under the variable fee approach,
the discounting rate consists of the risk-free rate, extrapolated over
the duration exceeding the period for which observable data are
available and adjusted for a liquidity premium determined based on
the underlying assets and reflecting the illiquidity of liabilities.
The risk adjustment is determined according to the cost of capital
method, including future payments and excluding massive lapses.
It is measured within a confidence range of 60-70%. This one
corresponds to a level of confidence of 65% at 31 December 2023
(64% at 31 December 2022).
\u25a0 For protection contracts measured under the general model and
for liabilities for incurred claims under the simplified approach, the
discounting rate consists of the risk-free rate adjusted to reflect the
illiquidity of liabilities.
The level of confidence used in determining the adjustment for non-
financial risks for the main countries is 70% (based on the quantile
The Group applies IFRS 17 to insurance contracts issued, reinsurance
contracts issued and held, and discretionary investment contracts issued
(if the entity also issues insurance contracts).
The main IFRS 17 contracts issued by the Group correspond to:
\u25a0 contracts covering risks related to persons or property; and
\u25a0 life or savings contracts.
These contracts are described in note 6.d Assets and liabilities related
Prior separation of components covered by other standards
When insurance or investment contracts with discretionary participation
include components, which would fall within the scope of another
standard if they were separate contracts, an analysis must be carried
out to determine whether these components should be accounted for
\u25a0 an embedded derivative is separated from the host insurance contract
and accounted for under IFRS 9 when its economic characteristics and
risks are not closely related to those of the host contract;
\u25a0 an investment component corresponds to the amount that the
insurer is required to repay to the insured in all cases whether the
insured event occurs or not. It is separated from the host insurance
contract and accounted for under IFRS 9 when it is distinct from the
host insurance contract and when equivalent contracts could be sold
separately in the same market or legal area. It is not separated if
it is closely linked to the host contract. Changes in a non-distinct
investment component (and in particular related payments) are not
recognised in the profit and loss account;
\u25a0 a promise to transfer to the policyholder distinct goods or services
other than the services of the insurance contract is separated from the
host insurance contract and accounted for under IFRS 15.
An insurance contract is a contract under which a party, the issuer,
assumes a significant insurance risk for another party, the policyholder,
by agreeing to indemnify the policyholder if a specified uncertain future
event, the insured event, is detrimental to the policyholder.
An insurance risk is significant if, and only if, an insured event can
cause the insurer to pay significant additional amounts in any scenario,
excluding scenarios that are devoid of commercial substance. A contract
transfers a significant insurance risk only if there is a scenario with a
commercial substance in which there is a possibility that the issuer will
incur a loss based on the present value.
Investment contracts with discretionary participating features
Investment contracts do not expose the insurer to significant insurance
risk. They are within the scope of IFRS 17 if they are issued by entities
that also issue insurance contracts.
Discretionary participation is defined as the contractual right to receive,
in addition to an amount that is not at the issuer's discretion, additional
amounts that are likely to represent a significant portion of the total
benefits provided under the contract, the timing or amount of which is
contractually left to the issuer's discretion and that are contractually
based on the returns arising from a defined set of contracts or type of
contract or on the realised and/or unrealised investment returns from
a defined set of assets held by the issuer, or the result of the entity or
fund issuing the contract.
Accounting and measurement
Insurance contracts are accounted and measured by groups of contracts
within portfolios of contracts covering similar risks and managed
together. Groups of contracts are determined according to their expected
profitability at inception: onerous contracts, profitable contracts with
a low risk of becoming onerous, and others. A group of contracts may
contain only contracts issued no more than one year apart (corresponding
to an annual \"cohort\"), except where the optional exemption provided for
in the European regulation applies (for life-savings contracts).
For creditor protection insurance (CPI), personal protection insurance and
other non-life risks, the Group uses the following discriminatory criteria
when constructing portfolios of homogeneous contracts: legal entity,
nature of the risks and partner, distributor. The reinsurance contracts
accepted shall follow the same principles.
For life and savings contracts, the Group uses the following criteria for
insurance portfolios: legal entity, product and underlying assets. Savings
and retirement contracts are classified in separate portfolios (including
in the period prior to the transition) due to the existence of a risk of
longevity in retirement contracts.
For reinsurance contracts held, the Group uses the following criteria: legal
entity, underlying item and partner. A portfolio can sometimes correspond
to a single reinsurance treaty.
Recognition and derecognition
A group of insurance contracts (or reinsurance contracts held) is
recognised from the earliest of the following dates: the beginning of the
period of coverage of the group of contracts, the date on which the first
payment of a policyholder in the group becomes due (or, in the absence
of such a date, when the first payment is received) and, in the case of
a group of onerous contracts, the date on which the group becomes
A group of reinsurance contracts held is recognised from the beginning
of the period of coverage of the group of reinsurance contracts held or,
if the reinsurance was contracted in anticipation of the coverage of an
underlying group of onerous insurance contracts, on the first recognition
Presentation in the balance sheet and in the
The Group has chosen to present the investments of insurance activities
and their results separately from the financial assets and liabilities of
Financial income or expenses from issued insurance contracts
are presented separately between the profit and loss account and
shareholders' equity for portfolios for which this breakdown has been
deemed relevant, as allowed by the standard. For the Protection
contracts liabilities measured under the general model and for the
liabilities for incurred claims arising from contracts measured under
the simplified model, this choice for portfolio classification was made by
taking into account both the effects in the profit and loss account of the
undiscounting of the liabilities and the accounting treatment of the assets
backing them. For contracts measured using the variable fee approach,
this choice was made to offset any accounting mismatch that may exist
in the profit and loss account between the effect of changes in fair value
from insurance or investment liabilities and that from the underlying
assets when these are not recognised at fair value through profit or loss.
Insurance contracts may be distributed and managed by non-insurance
entities of the Group that are remunerated as such by commissions
paid by insurance entities. The measurement model for insurance
contracts requires projecting in the contract fulfilment cash flows the
acquisition and management costs that will be paid in the future and
presenting in the profit and loss account, the release of the estimated
costs for the period on the one hand, and on the other, the actual costs.
For commissions between consolidated companies in the Group, the
Group restates the internal margin on the balance sheet and in the
profit and loss account (in the breakdown of insurance liabilities and
the related results between cash flows and contractual service margin)
by presenting as insurance service expenses the portion of the general
expenses (excluding internal margins) of the banking entities that can
be attributed to the insurance activity. The internal distributors' margins
are determined based on standardised management data for each of the
Effect of accounting estimates in interim
The Group has elected under IFRS 17 to record in its annual financial
statements the effects of changes in accounting estimates relating to
insurance contracts issued or held, without taking into account estimates
previously made in its interim financial statements.
6.d ASSETS AND LIABILITIES RELATED
The main insurance contracts issued by the Group are:
\u25a0 contracts covering risks related to persons or property: creditor
protection insurance (CPI), personal protection insurance and
other non-life risks, and reinsurance contracts accepted from other
insurers for these types of risks. These contracts are measured under
the general model (building block approach - BBA) or the premium
allocation approach (PAA) for contracts with a duration of at most
\u25a0 life or savings contracts: single and multi-support contracts, with or
without insurance risk, including a discretionary participation, and
unit-linked contracts with a minimum coverage in the event of death.
These contracts are measured under the variable fee approach (VFA).
The insurance contracts issued by BNP Paribas Group entities cover risks
of death (guarantees in the event of death), longevity (guarantees in the
event of life, for example life annuities), morbidity (guarantees in the
event of disability), disability, health (medical coverage), unemployment,
civil liability, and property damage.
Life or savings contracts are considered to be insurance contracts if
they include a survival risk (in the case of retirement contracts with a
mandatory annuity) or a death risk (in the case of unit-linked contracts
with a minimum death guarantee and savings contracts with a guarantee
of an additional amount in the case of death).
Savings contracts invested in a euro fund, and multi-support contracts
invested in unit-linked assets and in a euro fund are considered as
investment contracts with discretionary participating features under
the variable fee approach.
Insurance and reinsurance contracts issued and reinsurance contracts
held are presented on the assets or liabilities side of the balance sheet
according to the overall position of the portfolios to which they belong.
restated according to IFRS 17 and 9
Liabilities orLiabilities
Liabilities orLiabilities
Insurance contracts not measured under the
premium allocation approach
Insurance contracts measured under the premium
Reinsurance contracts held
ASSETS AND LIABILITIES RELATED TO INSURANCE
1.h PROPERTY, PLANT, EQUIPMENT
Property, plant and equipment and intangible assets shown in the
consolidated balance sheet are composed of assets used in operations
and investment property. Rights-of-use related to leased assets (see
note 1.i.2) are presented by the lessee within fixed assets in the same
category as similar assets held.
Assets used in operations are those used in the provision of services or
for administrative purposes, and include non-property assets leased by
the Group as lessor under operating leases.
Investment property comprises property assets held to generate rental
income and capital gains.
Investment property is recognised at cost, except for those held as
underlying assets under participating direct contracts (as amended by
IAS 40), which are measured at fair value through profit or loss and
presented in the balance sheet under \"Investments related to insurance
activities\" (see note 1.g.1).
Property, plant and equipment and intangible assets are initially
recognised at purchase price plus directly attributable costs, together
with borrowing costs where a long period of construction or adaptation is
required before the asset can be brought into service. By way of exception,
property occupied by the holder entity that is an underlying component
of direct participating contracts is measured at fair value (by amendment
Software developed internally by the BNP Paribas Group that fulfils
the criteria for capitalisation is capitalised at direct development cost,
which includes external costs and the labour costs of employees directly
attributable to the project.
Subsequent to initial recognition, property, plant and equipment and
intangible assets are measured at cost less accumulated depreciation
or amortisation and any impairment losses.
The depreciable amount of property, plant and equipment and intangible
assets is calculated after deducting the residual value of the asset. Only
assets leased by the Group as the lessor under operating leases are
presumed to have a residual value, as the useful life of property, plant
and equipment and intangible assets used in operations is generally the
same as their economic life.
Property, plant and equipment and intangible assets are depreciated
or amortised using the straight-line method over the useful life of the
asset. Depreciation and amortisation expense is recognised in the profit
and loss account under \"Depreciation, amortisation and impairment of
property, plant and equipment and intangible assets\".
Where an asset consists of a number of components which may require
replacement at regular intervals, or which have different uses or generate
economic benefits at different rates, each component is recognised
separately and depreciated using a method appropriate to that
component. The BNP Paribas Group has adopted the component-based
approach for property used in operations and for investment property.
The depreciation periods used for office property are as follows: 80 years
or 60 years for the shell (for prime and other property respectively);
30 years for facades; 20 years for general and technical installations;
and 10 years for fixtures and fittings.
Software is amortised, depending on its type, over periods of no more
than 8 years in the case of infrastructure developments and 3 years or
5 years in the case of software developed primarily for the purpose of
providing services to customers.
Software maintenance costs are expensed as incurred. However,
expenditure that is regarded as upgrading the software or extending its
useful life is included in the initial acquisition or production cost.
Depreciable property, plant and equipment and intangible assets are
tested for impairment if there is an indication of potential impairment at
the balance sheet date. Non-depreciable assets are tested for impairment
at least annually, using the same method as for goodwill allocated to
1.i.1 Groupcompany as lessor
Leases contracted by the Group as lessor are categorised as either finance
leases or operating leases.
In a finance lease, the lessor transfers substantially all the risks and
rewards of ownership of an asset to the lessee. It is treated as a loan
made to the lessee to finance the purchase of the asset.
The present value of the lease payments, plus any residual value, is
recognised as a receivable. The net income earned from the lease by the
lessor is equal to the amount of interest on the loan and is taken to the
profit and loss account under \"Interest income\". The lease payments are
spread over the lease term and are allocated to reduction of the principal
and to interest such that the net income reflects a constant rate of return
on the net investment outstanding in the lease. The rate of interest used
is the rate implicit in the lease.
Impairments of lease receivables are determined using the same
principles as applied to financial assets measured at amortised cost.
An operating lease is a lease under which substantially all the risks
and rewards of ownership of an asset are not transferred to the lessee.
The asset is recognised under property, plant and equipment in the
lessor's balance sheet and depreciated on a straight-line basis over its
useful life. The depreciable amount excludes the residual value of the
asset. The lease payments are taken to the profit and loss account in
full on a straight-line basis over the lease term. Lease payments and
depreciation expenses are taken to the profit and loss account under
\"Income from other activities\" and \"Expense on other activities\".
1.i.2 Groupcompany as lessee
Lease contracts concluded by the Group, with the exception of contracts
whose term is shorter than or equal to 12 months and low-value
contracts, are recognised in the balance sheet in the form of a right-
of-use on the leased asset presented under fixed assets, along with the
recognition of a financial liability for the rent and other payments to
be made over the leasing period. The right-of-use assets is amortised
on a straight-line basis and the financial liabilities are amortised on an
actuarial basis over the lease period. Dismantling costs corresponding
to specific and significant fittings and fixtures are included in the initial
right-of-use estimation, in counterparty of a provision liability.
The key hypotheses used by the Group for the measurement of rights of
use and lease liabilities are the following:
\u25a0 the lease term corresponds to the non-cancellable period of the
contract, together with periods covered by an extension option if
the Group is reasonably certain to exercise this option. In France,
the standard commercial lease contract is the so-called \"three, six,
nine\" contract for which the maximum period of use is nine years,
with a first non-cancellable period of three years followed by two
optional extension periods of three years each; hence, depending on
the assessment, the lease term can be of three, six or nine years.
When investments like fittings or fixtures are performed under the
contract, the lease term is aligned with their useful lives. For tacitly
renewable contracts, with or without an enforceable period, related
right of use and lease liabilities are recognised based on an estimate
of the reasonably foreseeable economic life of the contracts, minimal
occupation period included;
\u25a0 the discount rate used to measure the right of use and the lease
liability is assessed for each contract as the interest rate implicit in
the lease, if that rate can be readily determined, or more generally
based on the incremental borrowing rate of the lessee at the date of
signature. The incremental borrowing rate is determined considering
the average term (duration) of the contract;
\u25a0 when the contract is modified, a new assessment of the lease liability
is made taking into account the new residual term of the contract,
and therefore a new assessment of the right of use and the lease
liability is established.
1.i.1 Groupcompany as lessor
Leases contracted by the Group as lessor are categorised as either finance
leases or operating leases.
In a finance lease, the lessor transfers substantially all the risks and
rewards of ownership of an asset to the lessee. It is treated as a loan
made to the lessee to finance the purchase of the asset.
The present value of the lease payments, plus any residual value, is
recognised as a receivable. The net income earned from the lease by the
lessor is equal to the amount of interest on the loan and is taken to the
profit and loss account under \"Interest income\". The lease payments are
spread over the lease term and are allocated to reduction of the principal
and to interest such that the net income reflects a constant rate of return
on the net investment outstanding in the lease. The rate of interest used
is the rate implicit in the lease.
Impairments of lease receivables are determined using the same
principles as applied to financial assets measured at amortised cost.
An operating lease is a lease under which substantially all the risks
and rewards of ownership of an asset are not transferred to the lessee.
The asset is recognised under property, plant and equipment in the
lessor's balance sheet and depreciated on a straight-line basis over its
useful life. The depreciable amount excludes the residual value of the
asset. The lease payments are taken to the profit and loss account in
full on a straight-line basis over the lease term. Lease payments and
depreciation expenses are taken to the profit and loss account under
\"Income from other activities\" and \"Expense on other activities\".
Main defined-benefit pension plans for Group
entities and indemnities payable on retirement
In Belgium, BNP Paribas Fortis funds a defined-benefit plan, based on
final salary and number of years of service, for its management and
employees who joined the bank before its pension plans were harmonised
on 1 January 2002. Actuarial liabilities under this scheme are pre-funded
at 91% at 31 December 2023 (compared with 88% at 31 December 2022)
through insurance companies.
BNP Paribas Fortis senior managers joining before 1 January 2015 are
covered by a top-up pension plan, paying a lump sum based on the
number of years of service and final salary. This plan is pre-funded at
94% at 31 December 2023 (90% at 31 December 2022) through insurance
In Belgium, employees benefit from a defined-contribution scheme with
a legal obligation for the employer to guarantee a minimum return on
financial assets invested. Thus, a provision was recognised for these
schemes, as this guarantee is not entirely covered by the insurance
In France, BNP Paribas pays a top-up banking industry pension arising
from rights acquired to 31 December 1993 by retired employees and
active employees in service at that date. At 31 December 2023, the
Group's residual obligations for these employees were recognised on
the balance sheet in full.
The defined-benefit plans previously granted to some Group senior
managers have all been closed to new employees and converted into top-
up type schemes. The amounts allocated to residual beneficiaries, subject
to their presence within the Group at retirement, were fixed when these
schemes were closed. At 31 December 2023, these pension plans were
funded at 264% through insurance companies (221% at 31 December
In the United Kingdom, defined-benefit pension plans (pension funds) still
exist but are closed to new employees. Under these plans, the defined
pension is generally based on final salary and number of years of service.
Pension schemes are managed by independent management bodies
(Trustees). At 31 December 2023, obligations for all UK entities were 118%
covered by financial assets, compared with 125% at 31 December 2022.
In Switzerland, liabilities relate to top-up pension plans based on the
principle of defined-contribution schemes with guaranteed returns,
paying an annuity under pre-defined terms. These schemes are managed
by a foundation. At 31 December 2023, obligations were 111% covered by
financial assets, compared with 121% at 31 December 2022.
In the United States, defined-benefit pension plans are based on annual
vesting rights to a lump sum comprising a pension expressed as a
percentage of annual salary and paying interest at a pre-defined rate.
These plans are closed to new entrants and have offered almost no new
vesting rights. At 31 December 2023, the obligation was 87% covered by
financial assets, (85% at 31 December 2022).
In Germany, liabilities are mainly related to defined-benefit pension
plans, closed to new employees. Under these plans, the defined pension
is generally based on the number of years of service and final salary.
They offer the payment of an annuity under pre-defined terms. At
31 December 2023, the obligation was 66% covered by financial assets,
(70% at 31 December 2022).
In T\u00fcrkiye, the main pension plan replaces the national pension scheme
and should eventually be transferred to the Turkish State. This plan offers
guarantees exceeding the minimal legal requirements. At the end of
2023, obligations under this plan are fully funded by financial assets held
with an external foundation; these financial assets exceeding the related
obligations, this surplus is not recognised as an asset by the Group.
Other post-employment benefits
Group employees also receive various other contractual post-employment
benefits, such as indemnities payable on retirement, determined
according to minimal legal requirements (Labour Code, collective
agreements) or according to specific company-level agreements.
In France, the obligations for these benefits are funded through a contract
held with a third-party insurer. At 31 December 2023, this obligation was
127% covered by financial assets, compared with 132% at 31 December
The law of 14 April 2023 changed the age and quarters criteria required
to settle pension rights. The specificities of this law have been taken into
account for the determination of the present value of the obligation under
IFRS, with a decrease impact of its value of EUR 22 million.
In other countries, the obligations of the Group related to other post-
employment benefits are mainly concentrated in Italy, where vested
rights up to 31 December 2006 were frozen.
COMPONENTS OF THE COST OF DEFINED-BENEFIT PLANS
Interest income on plan asset
Interest income on reimbursement rights
Expected return on asset ceiling
TOTAL RECOGNISED IN \"SALARY AND EMPLOYEE BENEFIT EXPENSE\"
of which continuing activities
of which discontinued activities
OTHER ITEMS RECOGNISED DIRECTLY IN EQUITY
Actuarial (losses)/gains on plan assets or reimbursement rights
Actuarial (losses)/gains of demographic assumptions on the present value of obligations
Actuarial (losses)/gains of financial assumptions on the present value of obligations
Experience (losses)/gains on obligations
Variation of the effect of assets limitation
TOTAL OF OTHER ITEMS RECOGNISED DIRECTLY IN EQUITY
of which continuing activities
of which discontinued activities
MAIN ACTUARIAL ASSUMPTIONS USED TO CALCULATE OBLIGATIONS
In the Eurozone, United Kingdom and United States, the Group discounts its obligations using the yields of high quality corporate bonds, with a term
consistent with the duration of the obligations.
The ranges of rates used are as follows:
restated according to IFRS 17 and 9
(1) Includingprice increases (inflation)
Since 2013, BNP Paribas has introduced a Group loyalty scheme with
a cash payment, at the end of a three-year to four-year vesting period,
which fluctuates according to the Group's intrinsic performance. The aim
of this loyalty scheme is to make different categories of managerial staff
partners in the Group's development and profitability objectives. These
personnels are representative of the Group's talent and the breadth of its
managerial framework, i.e. senior managers, managers in key positions,
line managers and experts, high-potential managers, high-performing
young executives with good career development prospects and key
contributors to the Group's results.
The amounts allocated under this plan are linked to changes in the
Group's operational performance over the duration of the plan (for 80%)
and to the achievement of the Group's corporate social responsibility
(CSR) targets (for 20%). These ten targets are in line with the four pillars
on which the Group's CSR policy is based. In addition, the final payment
is subject to continuous service within the Group between the grant date
and the payment date, provided that the Group's operating income and
pre-tax income for the year prior to payment are strictly positive. For
employees subject to special regulatory frameworks, this loyalty scheme
is adjusted in accordance with the CRD European Directive.
The net obligation related to deferred compensation plans and loyalty
schemes amounts to EUR 1,033 million at 31 December 2023 (EUR
1,017 million at 31 December 2022).
Net provisions for other long-term benefits
Asset recognised in the balance sheet under the other long-term benefits
Obligation recognised in the balance sheet under the other long-term benefits
BNP Paribas has implemented a number of voluntary redundancy
plans and headcount adaptation plans for employees who meet certain
eligibility criteria. The obligations to eligible active employees under such
plans are provided for as soon as a bilateral agreement or a bilateral
agreement proposal for a particular plan is made.
In 2023, BNP Paribas Personal Finance subgroup implemented a
voluntary departure plan in France in respect of which a provision of
EUR 215 million was established.
Provision for voluntary departure, early retirement plans, and headcount adaptation plans
As part of the Group's variable remuneration policy, deferred annual
compensation plans offered to certain high-performing employees or set
up pursuant to special regulatory frameworks may entitle beneficiaries
to variable compensation settled in cash but linked to the share price,
payable over several years.
Variable compensation for employees, subject
to special regulatory frameworks
Since the publication of the Decree by the French Ministry of Finance on
13 December 2010, and following the provisions of the European Directive
CRD 4 of 26 July 2013, modified by the CRD 5 Directive of 20 May 2019,
transposed into the French law in the Monetary and Financial Code by the
Ordinance of 20 February 2014, and the Ordinance of 21 December 2020,
as well as the Decrees and Orders of 3 November 2014 and 22 December
2020 and the Delegated European Regulation of 25 March 2021, the
variable compensation plans apply to Group employees performing
activities that may have a material impact on the Group's risk profile.
Under these plans, payment is deferred over time and is contingent on
the performance achieved by the business lines, core businesses and
Sums will mostly be paid in cash linked to the increase or decrease in
the BNP Paribas share price.
Deferred variable compensation for other
Sums due under the annual deferred compensation plans for high-
performing employees are partly paid in cash linked to the increase or
decrease in the BNP Paribas share price.
Employee benefits are classified into four categories:
\u25a0 short-term benefits, such as salary, annual leave, incentive plans,
profit-sharing and additional payments;
\u25a0 long-term benefits, including compensated absences, long-service
awards, and other types of cash-based deferred compensation;
\u25a0 termination benefits;
\u25a0 post-employment benefits, including top-up banking industry pensions
and retirement bonuses in France and pension plans in other countries,
some of which are operated through pension funds.
The Group recognises an expense when it has used services rendered by
employees in exchange for employee benefits.
These are benefits, other than short-term benefits, post-employment
benefits and termination benefits. This relates, in particular, to
compensation deferred for more than 12 months and not linked to the
BNP Paribas share price, which is accrued in the financial statements
for the period in which it is earned.
The actuarial techniques used are similar to those used for defined-
benefit post-employment benefits, except that the revaluation items are
recognised in the profit and loss account and not in equity.
Termination benefits are employee benefits payable in exchange for the
termination of an employee's contract as a result of either a decision
by the Group to terminate a contract of employment before the legal
retirement age, or a decision by an employee to accept voluntary
redundancy in exchange for these benefits. Termination benefits due
more than 12 months after the balance sheet date are discounted.
In accordance with IFRS, the BNP Paribas Group draws a distinction
between defined-contribution plans and defined-benefit plans.
Defined-contribution plans do not give rise to an obligation for the
Group and do not require a provision. The amount of the employer's
contributions payable during the period is recognised as an expense.
Only defined-benefit schemes give rise to an obligation for the Group.
This obligation must be measured and recognised as a liability by means
The classification of plans into these two categories is based on the
economic substance of the plan, which is reviewed to determine whether
the Group has a legal or constructive obligation to pay the agreed benefits
Post-employment benefit obligations under defined-benefit plans are
measured using actuarial techniques that take demographic and financial
assumptions into account.
The net liability recognised with respect to post-employment benefit
plans is the difference between the present value of the defined-benefit
obligation and the fair value of any plan assets.
The present value of the defined-benefit obligation is measured on
the basis of the actuarial assumptions applied by the Group, using the
projected unit credit method. This method takes into account various
parameters, specific to each country or Group entity, such as demographic
assumptions, the probability that employees will leave before retirement
age, salary inflation, a discount rate, and the general inflation rate.
When the value of the plan assets exceeds the amount of the obligation,
an asset is recognised if it represents a future economic benefit for the
Group in the form of a reduction in future contributions or a future partial
refund of amounts paid into the plan.
The annual expense recognised in the profit and loss account under
\"Salaries and employee benefits\", with respect to defined-benefit plans
includes the current service cost (the rights vested by each employee
during the period in return for service rendered), the net interests linked
to the effect of discounting the net defined-benefit liability (asset), the
past service cost arising from plan amendments or curtailments, and the
effect of any plan settlements.
Remeasurements of the net defined-benefit liability (asset) are recognised
in shareholders' equity and are never reclassified to profit or loss. They
include actuarial gains and losses, the return on plan assets and any
change in the effect of the asset ceiling (excluding amounts included in
net interest on the defined-benefit liability or asset).
As part of the Group's variable remuneration policy, deferred annual
compensation plans offered to certain high-performing employees or set
up pursuant to special regulatory frameworks may entitle beneficiaries
to variable compensation settled in cash but linked to the share price,
payable over several years.
Variable compensation for employees, subject
to special regulatory frameworks
Since the publication of the Decree by the French Ministry of Finance on
13 December 2010, and following the provisions of the European Directive
CRD 4 of 26 July 2013, modified by the CRD 5 Directive of 20 May 2019,
transposed into the French law in the Monetary and Financial Code by the
Ordinance of 20 February 2014, and the Ordinance of 21 December 2020,
as well as the Decrees and Orders of 3 November 2014 and 22 December
2020 and the Delegated European Regulation of 25 March 2021, the
variable compensation plans apply to Group employees performing
activities that may have a material impact on the Group's risk profile.
Under these plans, payment is deferred over time and is contingent on
the performance achieved by the business lines, core businesses and
Sums will mostly be paid in cash linked to the increase or decrease in
the BNP Paribas share price.
Deferred variable compensation for other
Sums due under the annual deferred compensation plans for high-
performing employees are partly paid in cash linked to the increase or
decrease in the BNP Paribas share price.
Stock option and share award plans
The expense related to stock option and share award plans is recognised
over the vesting period, if the benefit is conditional upon the grantee's
Stock options and share award expenses are recorded under salary
and employee benefits expenses, with a corresponding adjustment to
shareholders' equity. They are calculated on the basis of the overall plan
value, determined at the date of grant by the Board of directors.
In the absence of any market for these instruments, financial valuation
models are used that take into account any performance conditions
related to the BNP Paribas share price. The total expense of a plan is
determined by multiplying the unit value per option or share awarded
by the estimated number of options or shares awarded vested at the end
of the vesting period, taking into account the conditions regarding the
grantee's continued employment.
The only assumptions revised during the vesting period, and hence
resulting in a remeasurement of the expense, are those relating to
the probability that employees will leave the Group and those relating
to performance conditions that are not linked to the price value of
Share price-linked cash-settled deferred
The expense related to these plans is recognised in the year during which
the employee rendered the corresponding services.
If the payment of share-based variable compensation is explicitly subject
to the employee's continued presence at the vesting date, the services
are presumed to have been rendered during the vesting period and the
corresponding compensation expense is recognised on a pro rata basis
over that period. The expense is recognised under salary and employee
benefits expenses with a corresponding liability in the balance sheet. It is
revised to take into account any non-fulfilment of the continued presence
or performance conditions and the change in BNP Paribas share price.
If there is no continued presence condition, the expense is not deferred,
but recognised immediately with a corresponding liability in the balance
sheet. This is then revised on each reporting date until settlement to
take into account any performance conditions and the change in the
3.h OTHER NET LOSSES FOR RISK ON
In 2023, the Group modified its accounting policy relating to the risk of
loss of cash flows on financial instruments granted that are not linked
to the counterparty's default, such as legal risks calling into question the
validity or enforceability of such contracts.
The effect on expected cash flows due to these risks is now considered
as a change in the contract's cash flows, in accordance with IFRS 9
B5.4.6, and is recorded as a decrease in the gross value of the asset.
It was previously recognised separately in accordance with IAS 37 in
\"Provisions for risks and charges\" (see note 5.n). Expected losses on
derecognised financial instruments, as is the case when loans have been
repaid, continue to be recognised in accordance with IAS 37.
The corresponding expected and realised cash flow losses are now
presented in \"Other net losses for risk on financial instruments\".
In 2023, the expense thus recognised mainly related to mortgage loans in
Poland amounting to EUR 450 million (compared with EUR 157 million at
31 December 2022, presented as \"Revenues\") and foreign currency loans
issued by BNP Paribas Personal Finance amounting to EUR 221 million
(compared with EUR 130 million at 31 December 2022, presented as
In 2023, the Group modified its accounting policy relating to the risk of
loss of cash flows on financial instruments granted that are not linked
to the counterparty's default, such as legal risks calling into question the
validity or enforceability of such contracts (see note 3.h).
The effect on expected cash flows due to these risks is now considered
as a change in the contract's cash flows, in accordance with IFRS 9
B5.4.6, and is recorded as a decrease in the gross value of the asset.
It was previously recognised separately in accordance with IAS 37 in
\"Provisions for risks and charges\" (see note 5.n). Expected losses on
derecognised financial instruments, as is the case when loans have been
repaid, continue to be recognised in accordance with IAS 37.
As a result, EUR 313 million previously presented in \"Provisions for
litigations\" were deducted from \"Financial assets at amortised cost\".
As of 31 December 2023, reserves related to the uncertainty on the
residual value of Arval's vehicles previously recognised as a decrease in
assets were included in \"Other provisions for contingencies and charges\".
PROVISIONS AND DISCOUNT FOR HOME SAVINGS ACCOUNTS AND PLANS
Deposits collected under home savings accounts and plans
of which deposits collected under home savings plans
Aged between 4 and 10 years
Outstanding loans granted under home savings accounts and plans
of which loans granted under home savings plans
Provisions and discount recognised for home savings accounts and plans
provisions recognised for home savings plans
provisions recognised for home savings accounts
discount recognised for home savings accounts and plans
ACTUAL RATE OF RETURN ON PLAN ASSETS AND REIMBURSEMENT RIGHTS OVER THE PERIOD
restated according to IFRS 17 and 9
restated according to IFRS 17 and 9
(1) InFrance, the breakdown of plan assets reflects the breakdown of the general fund of the insurance company through which the Group's obligations
The Group introduced an asset management governance for assets
backing defined-benefit pension plan commitments, the main objectives
of which are the management and control of the risks in terms of
It sets out investment principles, in particular, by defining an
investment strategy for plan assets, based on financial objectives and
risk management, to specify the way in which plan assets have to be
managed, via financial management servicing contracts.
The investment strategy is based on an assets and liabilities management
analysis that should be realised at least every three years for plans with
assets in excess of EUR 100 million.
Post-employment healthcare benefits
The Group offers some healthcare benefit plans for retired employees,
The present value of post-employment healthcare benefit obligations
stood at EUR 78 million at 31 December 2023, compared with EUR
83 million at 31 December 2022.
1.n CURRENT AND DEFERRED TAX
The current income tax charge is determined on the basis of the tax laws
and tax rates in force in each country in which the Group operates during
the period in which the income is generated.
Deferred taxes are recognised when temporary differences arise between
the carrying amount of an asset or liability in the balance sheet and its
Deferred tax liabilities are recognised for all taxable temporary differences
\u25a0 taxable temporary differences on initial recognition of goodwill;
\u25a0 taxable temporary differences on investments in enterprises under
the exclusive or joint control of the Group, where the Group is able
to control the timing of the reversal of the temporary difference and
it is probable that the temporary difference will not reverse in the
Deferred tax assets are recognised for all deductible temporary
differences and unused carryforwards of tax losses only to the extent
that it is probable that the entity in question will generate future taxable
profits against which these temporary differences and tax losses can
Deferred tax assets and liabilities are measured using the liability method,
using the tax rate which is expected to apply to the period when the asset
is realised or the liability is settled, based on tax rates and tax laws that
have been or will have been enacted by the balance sheet date of that
period. They are not discounted.
Deferred tax assets and liabilities are offset when they arise within the
same tax group, they fall under the jurisdiction of a single tax authority,
and there is a legal right to offset.
As regards the assessment of uncertainty over income tax treatments,
the Group adopts the following approach:
\u25a0 the Group assesses whether it is probable that a taxation authority
will accept an uncertain tax treatment;
\u25a0 any uncertainty shall be reflected when determining the taxable
profit (loss) by considering either the most likely amount (having the
higher probability of occurrence), or the expected value (sum of the
probability-weighted amounts).
Current and deferred taxes are recognised as tax income or expenses
in the profit and loss account, except for those relating to a transaction
or an event directly recognised in shareholders' equity, which are also
recognised in shareholders' equity. This concerns in particular the tax
effect of coupons paid on financial instruments issued by the Group and
qualified as equity instruments, such as undated super subordinated
When tax credits on revenues from receivables and securities are used
to settle corporate income tax payable for the period, the tax credits are
recognised on the same line as the income to which they relate. The
corresponding tax expense continues to be carried in the profit and loss
account under \"Corporate income tax\".
1.p USE OF ESTIMATES IN THE
PREPARATION OF THE FINANCIAL
Preparation of the financial statements requires managers of core
businesses and corporate functions to make assumptions and estimates
that are reflected in the measurement of income and expense in the profit
and loss account and of assets and liabilities in the balance sheet, and
in the disclosure of information in the notes to the financial statements.
This requires the managers in question to exercise their judgement and
to make use of information available at the date of the preparation of
the financial statements when making their estimates. The actual future
results from operations where managers have made use of estimates
may in reality differ significantly from those estimates, mainly according
to market conditions. This may have a material effect on the financial
This applies in particular to:
\u25a0 the analysis of the cash flow criterion for specific financial assets;
\u25a0 the measurement of expected credit losses. This applies in particular
to the assessment of significant increase in credit risk, the models and
assumptions used to measure expected credit losses, the determination
of the different economic scenarios and their weighting;
\u25a0 the analysis of renegotiated loans, in order to assess whether they
should be maintained on the balance sheet or derecognised;
\u25a0 the assessment of an active market, and the use of internally
developed models for the measurement of the fair value of financial
instruments not quoted in an active market classified in \"Financial
assets at fair value through equity\", or in \"Financial instruments at
fair value through profit or loss\", whether as assets or liabilities, and
more generally calculations of the fair value of financial instruments
subject to a fair value disclosure requirement;
\u25a0 the assumptions applied to assess the sensitivity to each type of market
risk of the market value of financial instruments and the sensitivity of
these valuations to the main unobservable inputs as disclosed in the
notes to the financial statements;
\u25a0 the appropriateness of the designation of certain derivative instruments
such as cash flow hedges, and the measurement of hedge effectiveness;
\u25a0 impairment tests performed on intangible assets;
\u25a0 the estimation of residual assets values under simple lease
agreements. These values are used as a basis for the determination
of depreciation as well as any impairment, notably in relation to the
effect of environmental considerations on the evaluation of future
prices of second-hand vehicles;
\u25a0 the deferred tax assets;
\u25a0 the measurement of insurance liabilities and assets, and investment
contracts with discretionary participation, by groups of contracts, on
the basis of discounted and probability weighted future fulfilment
cash flows, based on assumptions that can be derived from market or
entity-specific data, and the recognition of the results of such contracts
on the basis of the services rendered over the coverage period;
\u25a0 the measurement of uncertainty over income tax treatments and
other provisions for contingencies and charges. In particular, while
investigations and litigations are ongoing, it is difficult to foresee their
outcome and potential impact. Provision estimation is established
by taking into account all available information at the date of the
preparation of the financial statements, in particular the nature of
the dispute, the underlying facts, the ongoing legal proceedings and
court decisions, including those related to similar cases. The Group
may also use the opinion of experts and independent legal advisers
to exercise its judgement.
IFRS 17 AND IFRS 9 FIRST TIME APPLICATION IMPACTS
IFRS 17 AND IFRS 9 FIRST TIME APPLICATION IMPACTS ON THE BALANCE SHEET AT 31 DECEMBER 2022
1st time applicationrestated according
Cash and balances at central banks
Financial instruments at fair value through profit or loss
Loans and repurchase agreements
Derivative financial instruments
Derivatives used for hedging purposes
Financial assets at fair value through equity
Financial assets at amortised cost
Loans and advances to credit institutions
Loans and advances to customers
Remeasurement adjustment on interest-rate risk hedged portfolios
Investments and other assets related to insurance activities
Current and deferred tax assets
Accrued income and other assets
Equity-method investments
Property, plant and equipment and investment property
Deposits from central banks
Financial instruments at fair value through profit or loss
Deposits and repurchase agreements
Derivative financial instruments
Derivatives used for hedging purposes
Financial liabilities at amortised cost
Deposits from credit institutions
Remeasurement adjustment on interest-rate risk hedged portfolios
Current and deferred tax liabilities
Accrued expenses and other liabilities
Technical reserves and other insurance liabilities
Liabilities related to insurance contracts
Financial liabilities related to insurance activities
Provisions for contingencies and charges
Liabilities associated with assets held for sale
Share capital, additional paid-in capital and retained earnings
Net income for the period attributable to shareholders
Total capital, retained earnings and net income for the period attributable to
Changes in assets and liabilities recognised directly in equity
TOTAL LIABILITIES AND EQUITY
The transition from IFRS 4 to IFRS 17 leads to the removal through equity
of assets and liabilities of insurance contracts recognised in accordance
with the previous standard net of deferred tax effects: insurance liabilities,
reinsurance assets held, and deferred policyholders' participation arising
from \"shadow accounting\". Receivables and payables related to insurance
or reinsurance contracts were not cancelled but are included in the new
measurement of insurance liabilities and assets.
The main impacts linked to the first time application of IFRS 4 and IFRS 17
(a) the removal of insurance assets and liabilities recognised under
on the assets side, -EUR 5.2 billion within \"Investments and other
assets related to insurance activities\": -EUR 2.3 billion linked to
reinsurance assets held, mainly mathematical reserves, and
-EUR 2.9 billion in respect of deferred profit-sharing arising from
on the liabilities side, -EUR 221.6 billion of insurance contract
liabilities previously recorded as \"Technical reserves and other
(b)the recognition of \"Liabilities related to insurance contracts\" for
+EUR 209.8 billion, including:
the best estimate of future fulfilment cash flows together with the
risk adjustment and the contractual service margin measured in
other assets and liabilities linked to insurance contracts (mainly
policyholders' receivables and payables).
The methods used at transition date for the measurement of the
insurance contracts are described in note 1.a Applicable accounting
standards \u2013 Transition from IFRS 4 to IFRS 17.
(c) The application of the amendment to IFRS 9 enabling the recognition
in the balance sheet of financial assets issued by the Group that
are held as underlying items of direct participating contracts and
are measured at fair value through profit or loss. Consequently,
\"Investments and other assets related to insurance activities\"
increased by +EUR 2 billion, against, on the liabilities side, an increase
of +EUR 0.8 billion in \"Issued debt securities at fair value through
profit or loss\" and +EUR 1.2 billion in \"Debt securities at amortised
(d) The Group also applies the amendments to IAS 40 and IAS 16 resulting
from IFRS 17, leading to measure at fair value through profit or loss of
the buildings held as underlying items of direct participating contracts
and recognise +EUR 1.6 billion within \"Investments and other assets
related to insurance activities\";
(e) \"Financial liabilities related to insurance activities\" previously
recorded as \"Issued debt securities\" for +EUR 5.7 billion or as \"Other
insurance liabilities\" have been combined under the same line;
(f) The application of IFRS 17 and IFRS 9 results in a -EUR 0.6 billion
impact to equity attributable to shareholders, net of tax effect at
At 1 January 2022, this impact was -EUR 1.6 billion of which
+EUR 0.5 billion related to the transition from IAS 39 to IFRS 9 and
-EUR 2.1 billion related to the transition from IFRS 4 to IFRS 17.
IFRS 9 AND IFRS 17 FIRST TIME APPLICATION IMPACTS ON \"INVESTMENTS AND OTHER ASSETS RELATED
TO INSURANCE ACTIVITIES\"
securities securities securitiesreceivables fications
fair value through profit
Financial assets and liabilities of insurance entities are managed by
portfolios corresponding to the insurance liabilities they back up or to
the own funds. The business models were therefore determined according
to these portfolios at the transition date to IFRS 9.
Under the business model and cash flow criteria, debt instruments
are largely classified according to the \"collect and sell\" model, except
for those representing unit-linked contracts, debt instruments held by
consolidated UCITS and managed at disposal value, which are measured
at fair value through profit or loss. Certain specific assets are designated
as at fair value through profit or loss. Most equity instruments are
measured at fair value through profit or loss, except for certain assets
backing own-funds and non-participating contracts portfolios, which are
measured at fair value through equity. Non-consolidated funds classified
as available-for-sale financial assets under IAS 39 have been reclassified
at fair value through profit or loss. The treatment of derivatives remains
unchanged, including for hedge accounting, for which the principles of
IAS 39 continue to be applied by the Group (see note 1.f.9).
Taxes and contributions, including those related to insurance activities,
amounted to EUR 2,442 million for the year ended 2023 (compared to
EUR 2,510 million for the year ended 2022).
Expenses directly attributable to insurance contracts are presented in
\"Net income from insurance activities\". These costs consist mainly of
distribution commissions paid for the acquisition of the contracts and
other costs necessary for handling the contracts. They are included in the
fulfilment expenses within the \"Insurance service result\" (see note 6.a).
Expenses attributable to insurance contracts include the operating
expenses incurred by the Group banking networks to distribute insurance
contracts. Related costs are assessed on the basis of the commissions paid
by the insurance entities to the internal distributors less their margin.
These costs are excluded from \"Operating expenses\" to be included in the
contracts fulfilment cash flows through the \"Reclassification of expenses
incurred by internal distributors attributable to insurance contracts\".
Operating costs not directly attributable to insurance contracts are
included in \"Operating expenses\".
Reconciliation by type and by function of insurance activities operating
expenses is presented in note 6.b.
The Group is composed of three operating divisions:
\u25a0 Corporate & Institutional Banking (CIB) which covers Global Banking,
Global Markets and Securities Services;
\u25a0 Commercial, Personal Banking & Services (CPBS) which covers
Commercial & Personal Banking in the Eurozone, with Commercial &
Personal Banking in France (CPBF), Commercial & Personal Banking in
Italy (BNL bc), Commercial & Personal Banking in Belgium (CPBB) and
Commercial & Personal Banking in Luxembourg (CPBL); Commercial
& Personal Banking outside the Eurozone, which is organised around
Europe-Mediterranean, to cover Central and Eastern Europe and
T\u00fcrkiye. Lastly, it also covers specialised businesses (Arval, BNP Paribas
Leasing Solutions, BNP Paribas Personal Finance, BNP Paribas Personal
Investors and New Digital Businesses like Nickel, Floa, Lyf);
\u25a0 Investment & Protection Services (IPS) which covers Insurance
(BNP Paribas Cardif), Wealth and Asset Management (BNP Paribas
Asset Management, BNPParibas Wealth Management and
BNP Paribas Real Estate), Management of the BNP Paribas Group's
portfolio of unlisted and listed industrial and commercial investments
(BNP Paribas Principal Investments).
Other Activities mainly include activities related to the Group's central
treasury function, some costs related to cross-business projects, the
residential mortgage lending business of Personal Finance (a significant
part of which is managed in run-off), and certain investments.
They also include non-recurring items resulting from applying the rules
on business combinations. In order to provide consistent and relevant
economic information for each core business, the impact of amortising
fair value adjustments recognised in the net equity of entities acquired
and restructuring costs incurred in respect to the integration of entities,
have been allocated to the \"Other Activities\" segment. The same applies
to transformation, adaptation and IT reinforcement costs relating to the
Group's savings programmes.
In addition, Other Activities carry the impact, related to the application
of IFRS 17, of the reclassification as a deduction from revenues of the
operating expenses \"attributable to insurance contracts\" of the Group's
business lines (other than Insurance) that distribute insurance contracts
(i.e. internal distributors), in order not to disrupt the readability of
their financial performance. This is also the case for the impact of the
volatility on the financial result generated by the recognition at fair
value through profit or loss of assets backing insurance entities' equity
or non-participating contracts. In the event of divestment connected to
this portfolio, the realised gains or losses are allocated to the revenues
of the Insurance business line.
Inter-segment transactions are conducted at arm's length. The segment
information presented comprises agreed inter-segment transfer prices.
The capital allocation is carried out on the basis of risk exposure, taking
into account various conventions relating primarily to the capital
requirement of the business as derived from the risk-weighted asset
calculations required under capital adequacy rules. Normalised equity
income by segment is determined by attributing to each segment the
income of its allocated equity. The capital allocation to segments is based
on a minimum of 11% of weighted assets. The breakdown of balance sheet
by core business follows the same rules as the breakdown of the profit
or loss by core business.
In order to be comparable with the presentation format used since
1 January 2023, the year ended 31 December 2022 of this note has
been restated for the following effects as if they had occurred on
\u25a0 Following the sale of Bank of the West on 1 February 2023, it was
decided to apply IFRS 5 standard relating to groups of assets and
liabilities held for sale to the management income. As a result, the
contribution of Bank of the West in 2022 and the capital gain related
to the sale in 2023 are both presented separately. Accordingly, in the
profit and loss account, profits and losses are reclassified on a separate
line \"Net income from discontinued activities\".
\u25a0 Since 1 January 2023, the Group has applied IFRS 17 \"Insurance
contracts\", as well as IFRS 9 for its insurance entities (see note 1.a).
operating expenses deemed \"attributable to insurance contracts\"
are recognised in deduction of revenues and no longer booked
in operating expenses. These accounting entries apply only to
Insurance and to Group entities (other than in the Insurance
business line) that distribute insurance contracts (i.e. internal
distributors) and have no impact on gross operating income;
the impact of the volatility on the financial result generated
by the recognition at fair value through profit or loss of assets
backing insurance entities' equity and non-participating contracts
is presented in \"Other Activities\". Accordingly, \"Other Activities\"
revenues reflect, for 2022, the impact of volatility relating to the
unfavourable market context;
capital gains from the Savings activity are now integrated in the
contractual service margin and are recognised over the entire
duration of insurance contracts. Accordingly, Insurance Revenues
recorded a decrease for 2022 due to the impact of capital gains
which offset the impact of volatility on the 2022 financial result.
\u25a0 Internal transfers of activities and results were made, particularly at
Global Markets (following BNP Paribas' acquisition of Exane, which
closed on 13 July 2021) and within Commercial & Personal Banking in
Belgium (e.g. transfer of some individual clients, SMEs in particular to
the corporate segment in relation with the commercial reorganisation).
These changes have no impact on the Group's results as a whole but
only on their analytical breakdown in 2022.
NET COMMISSION INCOME BY BUSINESS SEGMENT
Corporate & Institutional Banking
Commercial, Personal Banking & Services
Commercial & Personal Banking in the Eurozone
Commercial & Personal Banking in France(1)
Commercial & Personal Banking in Belgium(1)
Commercial & Personal Banking in Luxembourg(1)
Commercial & Personal Banking in the rest of the world
Arval & Leasing Solutions
New Digital Businesses & Personal Investors(1)
Investment & Protection Services
Other activities - excl. restatement related to insurance activities
Other activities - restatement related to insurance activities
(1) Commercial& Personal Banking in France, BNL banca commerciale, Commercial & Personal Banking in Belgium, Commercial & Personal Banking in
Luxembourg, Europe-Mediterranean and Personal Investors after the reallocation within Wealth and Asset Management of one-third of the Wealth
Management activities in France, Italy, Belgium, Luxembourg, Germany, T\u00fcrkiye and Poland.
(2) IncludingReal Estate and Principal Investments.
5.d MEASUREMENT OF THE FAIR VALUE
BNP Paribas has retained the fundamental principle that it should have
a unique and integrated processing chain for producing and controlling
the valuations of financial instruments that are used for the purpose of
daily risk management and financial reporting. All these processes are
based on a common economic valuation which is a core component of
business decisions and risk management strategies.
Economic value is composed of mid-market value, to which valuation
Mid-market value is derived from external data or valuation techniques
that maximise the use of observable and market-based data. Mid-market
value is a theoretical additive value which does not take account of i)
the direction of the transaction or its impact on the existing risks in the
portfolio, ii) the nature of the counterparties, and iii) the aversion of a
market participant to particular risks inherent in the instrument, the
market in which it is traded, or the risk management strategy.
Valuation adjustments take into account valuation uncertainty and
include market and credit risk premiums to reflect costs that could be
incurred in case of an exit transaction in the principal market.
Fair value generally equals the economic value, subject to limited
adjustments, such as own credit adjustments, which are specifically
required by IFRS standards.
The main valuation adjustments are presented in the section below.
Valuation adjustments retained by BNP Paribas for determining fair
Bid/offer adjustments: the bid/offer range reflects the additional exit cost
for a price taker and symmetrically the compensation sought by dealers
to bear the risk of holding the position or closing it out by accepting
BNP Paribas assumes that the best estimate of an exit price is the bid
or offer price, unless there is evidence that another point in the bid/offer
range would provide a more representative exit price.
Input uncertainty adjustments: when the observation of prices or
data inputs required by valuation techniques is difficult or irregular, an
uncertainty exists on the exit price. There are several ways to gauge the
degree of uncertainty on the exit price such as measuring the dispersion
of the available price indications or estimating the possible ranges of the
inputs to a valuation technique.
Model uncertainty adjustments: these relate to situations where
valuation uncertainty is due to the valuation technique used, even
though observable inputs might be available. This situation arises when
the risks inherent in the instruments are different from those available
in the observable data, and therefore the valuation technique involves
assumptions that cannot be easily corroborated.
Future Hedging Costs adjustments (FHC): this adjustment applies to
positions that require dynamic hedging throughout their lifetime leading
to additional bid/offer costs. Calculation methods capture these expected
costs in particular based on the optimal hedging frequency.
Credit valuation adjustment (CVA): the CVA adjustment applies to
valuations and market quotations whereby the credit worthiness of the
counterparty is not reflected. It aims to account for the possibility that
the counterparty may default and that BNP Paribas may not receive the
full fair value of the transactions.
In determining the cost of exiting or transferring counterparty risk
exposures, the relevant market is deemed to be an inter-dealer market.
However, the determination of CVA remains judgemental due to i) the
possible absence or lack of price discovery in the inter-dealer market, ii)
the influence of the regulatory landscape relating to counterparty risk
on the market participants' pricing behaviour and iii) the absence of a
dominant business model for managing counterparty risk.
The CVA model is grounded on the same exposures as those used for
regulatory purposes. The model attempts to estimate the cost of an
optimal risk management strategy based on i) implicit incentives and
constraints inherent in the regulations in force and their evolutions, ii)
market perception of the probability of default, and iii) default parameters
used for regulatory purposes.
Funding valuation adjustment (FVA): when valuation techniques are used
for the purpose of deriving fair value, funding assumptions related to
the future expected cash flows are an integral part of the mid-market
valuation, notably through the use of appropriate discount rates. These
assumptions reflect what the Bank anticipates as being the effective
funding conditions of the instrument that a market participant would
consider. This notably takes into account the existence and terms of any
collateral agreement. In particular, for non- or imperfectly collateralised
derivative instruments, they include an explicit adjustment to the
Own-credit valuation adjustment for debts (OCA) and for derivatives
(debit valuation adjustment - DVA): OCA and DVA are adjustments
reflecting the effect of credit worthiness of BNP Paribas, on respectively
the value of debt securities designated as at fair value through profit
or loss and derivatives. Both adjustments are based on the expected
future liability profiles of such instruments. The own credit worthiness is
inferred from the market-based observation of the relevant bond issuance
levels. The DVA adjustment is determined after taking into account the
Funding Valuation Adjustment (FVA).
Interest rate derivatives
Foreign exchange derivatives
DERIVATIVE FINANCIAL INSTRUMENTS
NOT USED FOR HEDGING PURPOSES
DERIVATIVE FINANCIAL INSTRUMENTS
USED FOR HEDGING PURPOSES
restated according to IFRS 17 and 9
Interest rate derivatives
Foreign exchange derivatives
DERIVATIVE FINANCIAL INSTRUMENTS
NOT USED FOR HEDGING PURPOSES
DERIVATIVE FINANCIAL INSTRUMENTS
USED FOR HEDGING PURPOSES
Transfers between levels may occur when an instrument fulfils the
criteria defined, which are generally market and product dependent.
The main factors influencing transfers are changes in the observation
capabilities, passage of time, and events during the transaction lifetime.
The timing of recognising transfers is determined at the beginning of
During the year 2023, the main transfers between Level 1 and Level 2 are
related to the reclassification of equity derivatives from Level 1 to Level 2
due to the reassessment of the observable nature of the associated
Description of main instruments in each level
The following section provides a description of the instruments in each
level in the hierarchy. It describes notably instruments classified in
Level 3 and the associated valuation methodologies.
For main trading book instruments and derivatives classified in Level 3,
further quantitative information is provided about the inputs used to
This level encompasses all derivatives and securities that are quoted
continuously in active markets.
Level 1 includes notably equity securities and liquid bonds, shortselling
of these instruments, derivative instruments traded on organised
markets (futures, options, etc.). It includes shares of funds and UCITS,
for which the net asset value is calculated on a daily basis, as well as
debt representative of shares of consolidated funds held by third parties.
The Level 2 stock of securities is composed of securities which are
less liquid than the Level 1 bonds. They are predominantly corporate
debt securities, government bonds, mortgage-backed securities, fund
shares and short-term securities such as certificates of deposit. They
are classified in Level 2 notably when external prices for the same
security can be regularly observed from a reasonable number of market
makers that are active in this security, but these prices do not represent
directly tradable prices. This comprises amongst other, consensus pricing
services with a reasonable number of contributors that are active market
makers as well as indicative runs from active brokers and/or dealers.
Other sources, such as primary issuance market, may also be used where
Repurchase agreements are classified predominantly in Level 2. The
classification is primarily based on the observability and liquidity of the
repo market, depending on the underlying collateral and the maturity
Debts issued designated as at fair value through profit or loss, are
classified in the same level as the one that would apply to the embedded
derivative taken individually. The issuance spread is considered
Derivatives classified in Level 2 comprise mainly the following
\u25a0 vanilla instruments such as interest rate swaps, caps, floors and
swaptions, credit default swaps, equity/foreign exchange (FX)/
commodities forwards and options;
\u25a0 structured derivatives for which model uncertainty is not significant
such as exotic FX options, mono- and multi-underlying equity/funds
derivatives, single curve exotic interest rate derivatives and derivatives
based on structured rates.
The above derivatives are classified in Level 2 when there is a documented
stream of evidence supporting one of the following:
\u25a0 fair value is predominantly derived from prices or quotations of
other Level 1 and Level 2 instruments, through standard market
interpolation or stripping techniques whose results are regularly
corroborated by real transactions;
\u25a0 fair value is derived from other standard techniques such as replication
or discounted cash flows that are calibrated to observable prices, that
bear limited model risk and enable an effective offset of the risks of the
instrument through trading Level 1 or Level 2 instruments;
\u25a0 fair value is derived from more sophisticated or proprietary valuation
techniques but is directly evidenced through regular back-testing using
external market-based data.
Determining whether an over-the-counter (OTC) derivative is eligible
for Level 2 classification involves judgement. Consideration is given to
the origin, transparency and reliability of external data used, and the
amount of uncertainty associated with the use of models. It follows that
the Level 2 classification criteria involve multiple analysis axis within an
\"observability zone\" whose limits are determined by i) a predetermined
list of product categories and ii) the underlying and maturity bands.
These criteria are regularly reviewed and updated, together with the
applicable valuation adjustments, so that the classification by level
remains consistent with the valuation adjustment policy.
Level 3 securities of the trading book mainly comprise units of funds
and unlisted equity shares measured at fair value through profit or loss
Unlisted private equities are systematically classified as Level 3, with
the exception of UCITS with a daily net asset value, which are classified
in Level 1 of the fair value hierarchy.
Shares and other unlisted variable income securities in Level 3 are valued
using one of the following methods: a share of revalued net book value,
multiples of comparable companies, future cash flow method, multi-
Repurchase agreements, mainly long-term or structured repurchase
agreements on corporate bonds and ABSs: the valuation of these
transactions requires proprietary methodologies given the bespoke nature
of the transactions and the lack of activity and price discovery in the
long-term repo market. The curves used in the valuation are corroborated
using available data such as recent long-term repo trade data and price
enquiry data. Valuation adjustments applicable to these exposures are
commensurate with the degree of uncertainty inherent in the modelling
choices and amount of data available.
Debts issued designated as at fair value through profit or loss, are
classified in the same level as the one that would apply to the embedded
derivative taken individually. The issuance spread is considered
Vanilla derivatives are classified in Level 3 when the exposure is beyond
the observation zone for rate curves or volatility surfaces, or relates
to less liquid markets such as tranches on old credit index series or
emerging markets interest rates markets. The main instruments are:
\u25a0 Interest rate derivatives: exposures mainly comprise swap products
in less liquid currencies. Classification is driven by the lower liquidity
of some maturities, while observation capabilities through consensus
may be available. The valuation technique is standard, and uses
external market information and extrapolation techniques;
\u25a0 Credit derivatives (CDS): exposures mainly comprise CDSs beyond the
maximum observable maturity and, to a much lesser extent, CDSs on
illiquid or distressed names and CDSs on loan indices. Classification
is driven by the lack of liquidity while observation capabilities may
be available notably through consensus. Level 3 exposures also
comprise CDS and Total Return Swaps (TRS) positions on securitised
assets. These are priced along the same modelling techniques as the
underlying bonds, taking into consideration the funding basis and
\u25a0 Equity derivatives: exposures essentially comprise long dated
forward or volatility products or exposures where there is a limited
market for optional products. The marking of the forward curves and
volatility surfaces beyond the maximum observable maturity relies
on extrapolation techniques. However, when there is no market for
model input, volatility or forward is generally determined on the basis
of proxy or historical analysis.
Similarly, long-term transactions on equity baskets are also classified
in Level 3, based on the absence of equity correlation observability on
These vanilla derivatives are subject to valuation adjustments linked to
uncertainty on liquidity, specialised by nature of underlying and liquidity
Structured derivatives classified in Level 3 predominantly comprise
hybrid products (FX/Interest Rates hybrids, Equity hybrids), credit
correlation products, prepayment-sensitive products, some stock basket
optional products and some interest rate optional instruments. The main
exposures are described below, with insight into the related valuation
techniques and on the source of uncertainty:
\u25a0 Structured interest rate options are classified in Level 3 when they
involve currencies where there is not sufficient observation or when
they include a quanto feature where the pay-off is measured with a
forex forward fixed rate (except for the main currencies). Long term
structured derivatives are also classified in Level 3;
\u25a0 Hybrid FX/Interest rate products essentially comprise a specific
product family known as Power Reverse Dual Currency (PRDC) when
there is material valuation uncertainty. When valuation of PRDCs
requires sophisticated modelling of joint behaviour of FX and interest
rate, and is notably sensitive to the unobservable FX/interest rate
correlations, such products are classified as Level 3. PRDCs valuations
are corroborated with recent trade data and consensus data;
\u25a0 Securitisation swaps mainly comprise fixed-rate swaps, cross-
currency or basis swaps whose notional is indexed to the prepayment
behaviour of some underlying portfolio. The estimation of the maturity
profile of securitisation swaps is corroborated by statistical estimates
using external historical data;
\u25a0 Forward volatility options are generally products whose pay-off
is indexed to the future variability of a rate index such as volatility
swaps. These products involve material model risk as it is difficult to
infer forward volatility information from market-traded instruments.
The valuation adjustment framework is calibrated to the uncertainty
inherent in the product, and to the range of uncertainty from the
existing external consensus data;
\u25a0 Inflation derivatives classified in Level 3 mainly comprise swap
products on inflation indices that are not associated with a liquid
indexed bond market, optional products on inflation indices (such
as caps and floors) and other forms of inflation indices involving
optionality on the inflation indices or on the inflation annual rate.
Valuation techniques used for inflation derivatives are predominantly
standard market models. Proxy techniques are used for a few limited
exposures. Although the valuations are corroborated through monthly
consensus data, these products are classified as Level 3 due to their
lack of liquidity and some uncertainties inherent in the calibration;
\u25a0 the valuation of bespoke CDOs requires correlation of default events
when there is material valuation uncertainty. This information is
inferred from the active index tranche market through a proprietary
projection technique and involves proprietary extrapolation and
interpolation techniques. Multi-geography CDOs further require an
additional correlation assumption. Finally, the bespoke CDO model
also involves proprietary assumptions and parameters related to the
dynamic of the recovery factor. CDO modelling is calibrated on the
observable index tranche markets, and is regularly back-tested against
consensus data on standardised pools. The uncertainty arises from
the model risk associated with the projection and geography mixing
technique, and the uncertainty of associated parameters, together
with the recovery modelling;
\u25a0 N to Default baskets are other forms of credit correlation products,
modelled through standard copula techniques. The main inputs
required are the pair-wise correlations between the basket components
which can be observed in the consensus and the transactions. Linear
baskets are considered observable;
\u25a0 Equity and equity-hybrid correlation products are instruments whose
pay-off is dependent on the joint behaviour of a basket of equities/
indices leading to a sensitivity of the fair value measurement to the
correlation amongst the basket components. Hybrid versions of these
instruments involve baskets that mix equity and non-equity underlyings
such as commodity indices, or foreign exchange rates. Only a subset
of the Equity/index correlation matrix is regularly observable and
traded, while most cross-asset correlations are not active. Therefore,
classification in Level 3 depends on the composition of the basket, the
maturity, and the hybrid nature of the product. The correlation input
is derived from a proprietary model combining historical estimators,
and other adjustment factors, that are corroborated by reference to
recent trades or external data. The correlation matrix is essentially
available from consensus services, and when a correlation between
two underlying instruments is not available, it might be obtained from
extrapolation or proxy techniques.
These structured derivatives are subject to specific valuation adjustments
to cover uncertainties linked to liquidity, parameters and model risk.
Valuation adjustments (CVA, DVA and FVA)
The valuation adjustment for counterparty credit risk (CVA), own-credit
risk for derivatives (DVA) and the explicit funding valuation adjustment
(FVA) are deemed to be unobservable components of the valuation
framework and therefore classified in Level 3. This does not impact,
in general cases, the classification of individual transactions into the
fair value hierarchy. However, a specific process allows to identify
individual deals for which the marginal contribution of these adjustments
and related uncertainty is significant and justifies classifying these
The table below provides the range of values of main unobservable inputs
for the valuation of Level 3 financial instruments. The ranges displayed
correspond to a variety of different underlying instruments and are
meaningful only in the context of the valuation technique implemented
by BNP Paribas. The weighted averages, where relevant and available,
are based on fair values, nominal amounts or sensitivities.
The main unobservable parameters used for the valuation of debt issued
in Level 3 are equivalent to those of their economic hedge derivative.
Information on those derivatives, displayed in the following table, is also
applicable to these debts.
Main product types composing the
Level 3 stock within the risk class
Valuation technique used for the product
Main unobservable inputs for
the product types considered
Long-term repo and reverse-
amongst other on the funding
basis of a benchmark bond
pool that is actively traded
and representative of the repo
private bonds (High Yield,0 bp to 152 bp30 bp(a)
Hybrid Forex/Interest rate
Hybrid Forex interest rate option
Hybrid inflation rates/Interest
Hybrid inflation interest rate
inflation rates mainly in
Floors and caps on inflation
1,384 1,928 rateor on the cumulative
inflation (such as redemption
floors), predominantly on
European and French inflation
Volatility of the year-on-
Forward Volatility products
such as volatility swaps,
Interest rate option pricing
Balance-guaranteed fixed rate,
basis or cross currency swaps,
European collateral pools
Collateralised Debt Obligations
and index tranches for inactive
Base correlation projection
Base correlation curve for
Recovery rate variance for
Single name Credit Default
Stripping, extrapolation and
2,875 6,146 derivativeson multi-
underlying baskets on stocks
Various volatility option models
(1) Theupper bound of the range relates to building, retail and services sector issuers that represent an insignificant portion of the balance sheet (CDSs with illiquid
(2) Theupper part of the range relates to 7 equities representing a non-material portion of the balance sheet on options with equity underlying instruments.
Including these inputs, the upper bound of the range would be around 196%.
(a) Weightsbased on relevant risk axis at portfolio level.
(b) Noweighting, since no explicit sensitivity is attributed to these inputs.
(c) Weightingis not based on risks, but on an alternative methodology in relation with the Level 3 instruments (present value or notional).
Table of movements in level 3 financial instruments
For Level 3 financial instruments, the following movements occurred during the year ended 2023:
restated according to IFRS 17 and 9
Gains (or losses) recognised in profit or
loss with respect to transactions expired
or terminated during the period
Gains (or losses) recognised in profit
or loss with respect to unexpired
instruments at the end of the period
Items related to exchange rate
Changes in fair value of assets and
liabilities recognised in equity
(1) Forthe assets, includes redemptions of principal, interest payments as well as cash inflows and outflows relating to derivatives. For the liabilities,
includes principal redemptions, interest payments as well as cash inflows and outflows relating to derivatives the fair value of which is negative.
Transfers out of Level 3 of derivatives include mainly the update of the
observability tenor of certain yield curves, and of market parameters
related to repurchase agreements and credit transactions but also the
effect of derivatives becoming only or mainly sensitive to observable
inputs due to the shortening of their lifetime.
Transfers into Level 3 of instruments at fair value reflect the effect of the
regular update of the observability zones.
Transfers have been reflected as if they had taken place at the beginning
The Level 3 financial instruments may be hedged by other Level 1 and
Level 2 instruments, the gains and losses of which are not shown in this
table. Consequently, the gains and losses shown in this table are not
representative of the gains and losses arising from management of the
net risk on all these instruments.
Sensitivity of fair value to reasonably possible
changes in level 3 assumptions
The following table summarises those financial assets and financial
liabilities classified as Level 3 for which alternative assumptions in one
or more of the unobservable inputs would change fair value significantly.
The amounts disclosed are intended to illustrate the range of possible
uncertainty inherent to the judgement applied when estimating Level 3
parameters, or when selecting valuation techniques. These amounts
reflect valuation uncertainties that prevail at the measurement date,
and even though such uncertainties predominantly derive from the
portfolio sensitivities that prevailed at that measurement date, they are
not predictive or indicative of future movements in fair value, nor do they
represent the effect of market stress on the portfolio value.
In estimating sensitivities, BNP Paribas either remeasured the financial
instruments using reasonably possible inputs, or applied assumptions
based on the valuation adjustment policy.
For the sake of simplicity, the sensitivity on cash instruments that are
not relating to securitised instruments was based on a uniform 1% shift
in the price. More specific shifts were however calibrated for each class
of the Level 3 securitised exposures, based on the possible ranges of the
For derivative exposures, the sensitivity measurement is based on
the credit valuation adjustment (CVA), the explicit funding valuation
adjustment (FVA) and the parameter and model uncertainty adjustments
Regarding the credit valuation adjustment (CVA) and the explicit funding
valuation adjustment (FVA), the uncertainty was calibrated based on
prudent valuation adjustments described in the technical standard
\"Prudent Valuation\" published by the European Banking Authority.
For other valuation adjustments, two scenarios were considered: a
favourable scenario where all or a portion of the valuation adjustment
is not considered by market participants, and an unfavourable scenario
where market participants would require twice the amount of valuation
adjustments considered by BNP Paribas for entering into a transaction.
restated according to IFRS 17 and 9
Equities and other equity securities
Loans and repurchase agreements
Derivative financial instruments
Interest rate and foreign exchange derivatives
SENSITIVITY OF LEVEL 3 FINANCIAL
Deferred margin on financial instruments
measured using techniques developed
internally and based on inputs partly
unobservable in active markets
Deferred margin on financial instruments (\"Day One Profit\") primarily
concerns the scope of financial instruments eligible for Level 3 and to
a lesser extent some financial instruments eligible for Level 2 where
valuation adjustments for uncertainties regarding parameters or models
are not negligible compared to the initial margin.
The Day One Profit is calculated after setting aside valuation adjustments
for uncertainties as described previously and released to profit or loss
over the expected period for which the inputs will be unobservable. The
unamortised amount is included under \"Financial instruments at fair
value through profit or loss\" as a reduction in the fair value of the relevant
Interest rate and foreign exchange derivatives
9.j FAIR VALUE OF FINANCIAL INSTRUMENTS
CARRIED AT AMORTISED COST
The information supplied in this note must be used and interpreted with
the greatest caution for the following reasons:
\u25a0 these fair values are an estimate of the value of the relevant
instruments at 31 December 2023. They are liable to fluctuate from
day to day as a result of changes in various parameters, such as
interest rates and credit quality of the counterparty. In particular, they
may differ significantly from the amounts actually received or paid
on maturity of the instrument. In most cases, the fair value is not
intended to be realised immediately, and in practice might not be
realised immediately. Consequently, this fair value does not reflect
the actual value of the instrument to BNP Paribas as a going concern;
\u25a0 most of these fair values are not meaningful, and hence are not taken
into account in the management of the commercial banking activities
which use these instruments;
\u25a0 estimating a fair value for financial instruments carried at historical
cost often requires the use of modelling techniques, hypotheses and
assumptions that may vary from bank to bank. This means that
comparisons between the fair values of financial instruments carried at
historical cost as disclosed by different banks may not be meaningful;
\u25a0 the fair values shown below do not include the fair values of finance
lease transactions, non-financial instruments such as property, plant
and equipment, goodwill and other intangible assets such as the value
attributed to demand deposit portfolios or customer relationships.
Consequently, these fair values should not be regarded as the actual
contribution of the instruments concerned to the overall valuation of
Loans and advances to credit institutions and customers(1)
Debt securities at amortised cost (note 5.e)
Deposits from credit institutions and customers
Debt securities (note 5.h)
Subordinated debt (note 5.h)
(1) Financeleases excluded.
restated according to IFRS 17 and 9
Loans and advances to credit institutions and customers(1)
Debt securities at amortised cost (note 5.e)
Deposits from credit institutions and customers
Debt securities (note 5.h)
Subordinated debt (note 5.h)
Liabilities associated with assets held for sale
(1) Financeleases excluded.
The valuation techniques and assumptions used by BNP Paribas ensure
that the fair value of financial assets and liabilities carried at amortised
cost is measured on a consistent basis throughout the Group. Fair value
is based on prices quoted in an active market when these are available.
In other cases, fair value is determined using valuation techniques such
as discounting of estimated future cash flows for loans, liabilities and
debt securities at amortised cost, or specific valuation models for other
financial instruments as described in note 1, Summary of significant
accounting policies applied by the BNP Paribas Group. The description
of the fair value hierarchy levels is also presented in the accounting
principles (see note 1.f.10). In the case of loans, liabilities and debt
securities at amortised cost that have an initial maturity of less than one
year (including demand deposits) or of most regulated savings products,
fair value equates to carrying amount. These instruments have been
classified in Level 2, except for loans to customers, which are classified
5.h DEBT SECURITIES AND SUBORDINATED DEBT
This note covers all issued debt securities and subordinated debt measured at amortised cost and designated as at fair value through profit or loss.
DEBT SECURITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS (NOTE 5.A)
(millions) interest step-up
payment(1) 31 December 2023
Redeemable subordinated debt
Perpetual subordinated debt
BNP Paribas Fortis Dec. 2007(3)
(1) Conditionsprecedent for coupon payment:
A Couponpayments are halted should the issuer have insufficient capital or the underwriters become insolvent or when the dividend declared for
Ageas shares falls below a certain threshold.
(2) Afteragreement from the banking supervisory authority and at the issuer's initiative, redeemable subordinated debt issues may contain a call
provision authorising the Group to redeem the securities prior to maturity by repurchasing them in the stock market, via public tender offers, or in the
case of private placements over the counter. Debt issued by BNP Paribas SA or foreign subsidiaries of the Group via placements in the international
markets may be subject to early redemption of the capital and early payment of interest due at maturity at the issuer's discretion on or after a
date stipulated in the issue particulars (call option), or in the event that changes in the applicable tax rules oblige the BNP Paribas Group issuer to
compensate debt-holders for the consequences of such changes. Redemption may be subject to a notice period of between 15 and 60 days, and is in all
cases subject to approval by the banking supervisory authorities.
(3) ConvertibleAnd Subordinated Hybrid Equity-linked Securities (CASHES) issued by BNP Paribas Fortis (previously Fortis Banque) in December 2007.
The CASHES are perpetual securities but may be exchanged for Ageas (previously Fortis SA/NV) shares at the holder's sole discretion at a price of
EUR 239.40. However, as of 19 December 2014, the CASHES will be automatically exchanged into Ageas shares if their price is equal to or higher than
EUR 359.10 for twenty consecutive trading days. The principal amount will never be redeemed in cash. The rights of the CASHES holders are limited to
the Ageas shares held by BNP Paribas Fortis and pledged to them.
Ageas and BNP Paribas Fortis have entered into a Relative Performance Note (RPN) contract, the value of which varies contractually so as to offset the
impact on BNP Paribas Fortis of the relative difference between changes in the value of the CASHES and changes in the value of the Ageas shares.
Since 1 January 2022, the liability is no longer eligible to prudential own funds.
DEBT SECURITIES MEASURED AT AMORTISED COST
Currency (millions) interest step-up
payment(1) 31 December 2023
Debt securities in issue with an initial maturity of less than one year
Negotiable debt securities
Debt securities in issue with an initial maturity of more than one year
Negotiable debt securities
Redeemable subordinated debt
Undated subordinated notes
BNP Paribas SA Oct. 85(5)
BNP Paribas SA Sept. 86(5)
BNP Paribas Cardif Nov. 14
BNP Paribas SA Aug. 23(6)
BNP Paribas SA July 84(3) (5)
Expenses and commission, related debt
(1) Conditionsprecedent for coupon payment:
B Paymentof the interest is mandatory, unless the Board of directors decides to postpone these payments after the shareholders' General Meeting
has officially noted that there is no income available for distribution, where this occurs within the 12-month period preceding the due date for
payment of the interest. Interest payments are cumulative and are payable in full once dividend payments resume;
C Paymentof the interest is mandatory, unless the Board of directors decides to postpone these payments after the shareholders' General Meeting
has validated the decision not to pay out a dividend, where this occurs within the 12-month period preceding the due date for payment of the
interest. Interest payments are cumulative and are payable in full once dividend payments resume. The bank has the option of resuming payment
of interest arrears, even where no dividend is paid out;
D Paymentof the interest is mandatory, except for cases of regulatory deficiency, in agreement with the regulator, or of suspension of payments.
Interest payments are cumulative and are payable in full, once coupon payments resume, or, if these events occur before, when the issuance is
redeemed or when the issuer is liquidated;
E Paymentof the interest is at full discretion and could be cancelled in whole or in part if the relevant regulator notifies based on its assessment of
the financial and solvency situation of the issuer. Interest Amounts on the notes will be non-cumulative, once coupon payments resume.
(2) Seereference relating to \"Debt securities at fair value through profit or loss\".
(3) Theparticipating notes issued by BNP Paribas SA may be repurchased as provided for in the law of 3 January 1983. The number of notes in the market
(4) Dependingon net income subject to a minimum of 85% of the TMO rate and a maximum of 130% of the TMO rate.
(5) Asfrom 31 December 2023, these securities are no longer eligible to prudential own funds.
(6) Theinstruments issued by BNP Paribas SA in August 2023 are contingent convertible securities classified as financial liabilities in accounting and
eligible to Additionnal Tier 1 capital (see note 1.f.8).
6.a NET INCOME FROM INSURANCE
The various income and expenses of insurance contracts are broken down
in the \"Net income from insurance activities\" as follows:
\u25a0 \"Insurance revenue\" include revenue from insurance activities related
to groups of insurance contracts issued. Insurance revenue reflects
the provision of services relating to a group of contracts in an amount
corresponding to the consideration to which the insurer expects to be
entitled in exchange for those services;
\u25a0 \"Insurance service expenses\": actual charges attributable to insurance
contracts incurred over the period, changes related to past and current
service, amortisation of acquisition costs, and the loss component for
\u25a0 \"Investment return\";
\u25a0 \"Net finance income or expenses from insurance contracts\" include
the change in the carrying amount of insurance contracts resulting
from the undiscounting effect, and the financial risk including changes
in financial assumptions.
Insurance service expenses(1)
Net finance income or expenses from insurance contracts
NET INCOME FROM INSURANCE ACTIVITIES
(1) Insuranceservice expenses include attributable expenses which amounted to -EUR 3,723 million for the year ended 2023, compared to -EUR 3,641 million
for the year ended 2022 (see note 6.b).
\"Insurance service result\" includes:
\u25a0 \"Insurance revenue\": for contracts under the variable fee approach
and under the building block approach it represents the release of
fulfilment insurance contracts cash flows over the period (excluding
changes in investment component and the amount allocated to the loss
component), change in the non-financial risk adjustment, amortisation
of the contractual service margin for services provided over the period,
the amount allocated for the amortisation of acquisition cost, and
experience adjustments related to premiums.
For contracts under the variable fee approach, the amortisation of
the margin on contractual services is determined after adjusting the
difference between the real-world expected financial return and the
risk-neutral projection. The main financial assumptions underlying
the calculation of the real-world expected financial return are those
adopted by the Group over the horizon of the strategic plan. Beyond
this horizon, the interest rate and return assumptions used are
determined in line with those underlying the risk-neutral projection.
The recovery of insurance acquisition cash flows corresponds to the
portion of the premiums that relate to recovering these cash flows and
the same amount is recognised as an expense on the line \"Amortisation
of insurance acquisition cash flows\".
For contracts under the simplified measurement model, revenue
represents expected cash flows over the period;
\u25a0 \"Insurance service expenses\" include incurred and past claims
expenses of the period (excluding repayments of investment
component) and other expenses that have been incurred related
to insurance activities. Other insurance service expenses include
the amortisation of insurance acquisition cash flows; changes that
relate to past services and changes that relate to future services.
This line includes also the operating expenses and depreciation and
amortisation attributable to insurance contracts;
\u25a0 \"Net expenses from reinsurance contracts held\" are service expenses
from reinsurance net of amounts recovered from reinsurers.
5.3 Risk management [Audited]
The specialised committees of the Board of directors (see part 2.1.2,
Corporate governance of BNP Paribas of chapter 2 Corporate governance
and internal control), which examine the risks taken and the risk policies
\u25a0 the Internal control, risk management and compliance Committee
\u25a0 the Joint Committee that combines the CCIRC and the Financial
\u25a0 the Corporate governance, ethics, nominations and CSR Committee
In line with the Group's Risk Appetite Statement, Executive Management
provides broad guidelines for risk management through Group-level
governance bodies of which the main ones are shown in the diagram
FIGURE 6: OVERVIEW OF GROUP LEVEL GOVERNING BODIES COVERING RISK-RELATED TOPICS
Compliance, Risk and Finance
Group Executive Committee
Group Supervision and Control Committee (GSCC)
General Management Credit Committee (CCDG)
Sustainable Finance Strategic Committee (SFSC)
General Management Doubtful Committee (CDDG)
Financial Markets Risk Committee (FMRC)
Country Envelope Committee
Risk & Development Policy Committee (RDPC)
Main Group-level governance bodies have the following roles:
\u25a0 Capital Committee, described under Capital management in section 5.2
Capital management and capital adequacy, validates the Group's
objectives in terms of solvency ratios and Total Loss Absorbing
Capacity (TLAC and MREL) requirements in case of resolution as well
as the trajectory to achieve these targets, monitors the compliance
with this trajectory and, when relevant, proposes corrective actions
to achieve target solvency ratios. As the Group's competent Executive
Management authority for all issues related to the internal credit
and operational risks model, the Capital Committee is informed of
decisions made in the MARCo Committees (Model Approval and Review
\u25a0 Group ALM Treasury Committee (Group ALCo) is responsible for the
management of the liquidity risk, interest rate risk in the banking book
and structural foreign exchange risk over the whole Group.
\u25a0 Group Supervision and Control Committee (GSCC) brings together the
Group's control functions at Executive Management level and takes a
Group-wide approach to tackling all aspects of risk exposure;
\u25a0 Acquisitions Committee decides on acquisitions, disposals and external
partnerships for operations under its jurisdiction as part of the Group's
general investment approval procedure. The Acquisitions Committee
reviews the strategic relevance of the proposed projects from the
Group's point of view, as well as the various components of the
business plans, including synergies and execution risks. In particular,
it ensures the intrinsic profitability of projects (measured by Return on
Investment), as well as the impact on the Group's solvency, liquidity
and profitability, and their adequacy with the Group's Risk Appetite
\u25a0 the Sustainable Finance Strategic Committee (SFSC) aims to validate
the Group's sustainable finance strategy and commitments in this area.
It approves the overall strategy in terms of sustainable finance, decides
the main focuses of sustainable finance commercial policies and
monitors their operational implementation. Where necessary, it also
validates cross-functional infrastructure choices ensuring expertise
and consistency in the implementation of regulatory requirements
and the Group's commitments in methods, analyses, risk management,
data, tools, standards and reporting related to sustainable finance.
\u25a0 the General Management Credit Committee (CCDG) is the Group's
highest authority concerning credit and counterparty risks. This
committee decides primarily on credit requests exceeding the
amount of individual delegations attributed to divisions and business
lines or relating to transactions of a specific nature or which would
deviate from the principles of the General Credit Policy. A Compliance
representative may attend CCDG meetings when an opinion on
financial security is needed;
\u25a0 the General Management Doubtful Committee (CDDG) is the Group's
highest level decision-making committee in terms of specific
provisioning and recognitions of losses relative to the Group's
\u25a0 the Financial Markets Risk Committee (FMRC) is the body which
governs the Group's risk profile of the capital markets activities; its
tasks include, among others, analysing market and counterparty risks
and setting limits for capital markets activities;
\u25a0 the Country Envelope Committees determine the Group's risk appetite
by setting limits for medium-to-high-risk countries in view of risk in
relation to country, market conditions, business strategies and aspects
\u25a0 the Risk & Development Policy Committees (RDPC) have the dual
objective of defining an appropriate risk policy for any given subject
which may be a business activity, a product, a geographic area
(region or country), a customer segment or economic sector, and of
investigating development opportunities in relation to the subject in
\u25a0 the Group IT Risk Committee (GITRC) defines and oversees the Group's
IT risk profile. This is the highest authority in terms of technological
and cybersecurity risk management.
RISK MANAGEMENT ORGANISATION
POSITION OF THE CONTROL FUNCTIONS
Risk management is central to the banking business and is one of the
cornerstones of operations for the BNP Paribas Group. BNP Paribas has
an internal control system covering all types of risks to which the Group
may be exposed, organised around three lines of defence (see section 2.4
Internal Control in chapter 2 Corporate governance and internal control):
\u25a0 as the first line of defence, internal control is the business of every
employee, and the heads of the operational activities are responsible
for establishing and running a system for identifying, assessing and
managing risks according to the standards defined by the functions
exercising an independent control in respect of the second line of
\u25a0 the main control functions within BNP Paribas ensuring the second
line of defence are the Compliance, RISK and LEGAL Functions. Their
Heads report directly to Chief Executive Officer and account for
the performance of their missions to the Board of directors via its
\u25a0 General Inspection provides a third line of defence. It is responsible
for the periodic control.
GENERAL RESPONSIBILITIES OF THE RISK
Responsibility for managing risks primarily lies with the divisions and
business lines that are at the origin of the underlying transactions. RISK
continuously performs a second-line control over credit and counterparty
risks, market risk, interest rate and foreign exchange rate risks on the
banking book, liquidity risks, insurance risks, and operational risk, including
technological and cybersecurity risks, over data protection risks, modelling
risks and environmental and social risk factors, as well as the associated
governance risks. As part of this role, it must ascertain the soundness
and sustainability of the business commercial developments and their
overall alignment with the risk appetite target set by the Group. RISK's
remit includes formulating recommendations on risk policies, analysing
the risk portfolio on a forward-looking basis, approving customers loans
and trading limits, guaranteeing the quality and effectiveness of monitoring
procedures, controlling the maturity of the processes and underlying
operational risks and defining or validating risk measurement methods.
RISK is also responsible for ensuring that all the risk implications of new
businesses or products have been adequately assessed.
Compliance deals identically with risks related to financial security
(money laundering, terrorist financing, corruption and influence peddling),
market integrity, protection of clients, professional ethics, tax regulations
applicable to customers and laws governing banking activities.
Its mission is to provide, through its opinions and decisions, as well as
through its supervision and second level-controls, a reasonable assurance
as to the effectiveness and consistency of the compliance system over
operations and the protection of its reputation.
The RISK organisation fully complies with the principles of independence,
vertical integration, and decentralisation issued by the Group's
Management for the Group's main control functions (Compliance, RISK,
LEGAL, and a third line of defence, General Inspection). Hence within RISK:
\u25a0 all the teams in charge of risks, including those in operating entities
have been integrated in the function with reporting lines to the Chief
Risk Officers of these entities;
\u25a0 the Chief Risk Officers of the entities report to RISK.
This organisation enables the governance of risk management activities
to be strengthened, especially regarding model risk management, through
RISK Independent Review and Control (RISK IRC) team, reporting directly to
the Chief Risk Officer (CRO) which groups together the teams in charge of
the independent review of the risk methodologies and models. This team
is also in charge of the independent review of operational risk of RISK
Function, with the organisation described in section 5.9 Operational risk.
In accordance with international standards and French regulations,
Compliance manages the system for monitoring compliance and
reputation risks for all of the Group's businesses in France and abroad.
The system for monitoring non-compliance and reputation risks is
described in section 5.9.
Independent and hierarchically integrated on a global basis, Compliance
brings together all employees reporting to the function. Its organisation is
based on its guiding principles (independence, integration, decentralisation
and subsidiarity of the function, dialogue with the business lines) through
local teams (operating divisions, CPBS, IPS and CIB), areas of expertise, and
departments in charge of transverse missions.
Role of the Chief Risk Officer
The Group Chief Risk Officer reports directly to the Chief Executive
Officer and sits on the Executive Committee of BNP Paribas. He has line
authority over all RISK employees. He can veto the decisions which are
not in line with the Risk Appetite Statement, concerning the risks under
RISK competency. The Group Chief Risk Officer has no connection, in
terms of authority, with the Heads of Core Businesses, business lines
and territories. He also has direct and independent access to the Board
of directors of BNP Paribas, via the Internal Control, Risk management
and Compliance Committee (CCIRC).
This positioning serves the following purposes:
\u25a0 ensuring the objectivity of risk control, by removing any involvement
in commercial relationships;
\u25a0 making sure senior management is warned of any deterioration in risk
and is rapidly provided with objective and comprehensive information
\u25a0 enabling the dissemination, throughout the Bank, of high and uniform
risk management standards and practices;
\u25a0 ensuring the quality of risk assessment methods and procedures by
calling on professional risk managers in charge of evaluating and
enhancing these methods and procedures in light of the best practices
implemented by international competitors.
Role of the Chief Compliance Officer
The Chief Compliance Officer reports to the Chief Executive Officer and
is a member of the BNP Paribas Executive Committee. She has direct
and independent access to the Board of directors and in particular to
its specialised committee, the Internal Control, Risk management and
Compliance Committee (CCIRC), and can thus inform it of any event likely
to have a significant impact on the Group. Lastly, the CCIRC periodically
interviews her, without the effective managers being present.
The Chief Compliance Officer has no operational activity outside of the
non-compliance and reputation risk management framework and no
commercial activity, which guarantees her independence of action. She
exercises hierarchical supervision over all the Compliance teams within
the various business units, geographical areas and functions.
ONE OF THE GROUP'S CORE FOUNDING
The BNP Paribas Group has a strong risk and compliance culture.
Executive Management has chosen to include the risk culture in three of
its key corporate culture documents:
The Group adopted a new Code of conduct in 2016. It applies to all
employees and defines the rules for our conduct in line with the core
values of our corporate culture. For example, employees are reminded
in the Code of conduct that the Group's interests are protected by
responsible risk-taking in a strict control environment. The Code of
conduct, updated in 2021, also includes rules for protecting customers'
interests, financial security, market integrity, professional ethics and
anti-bribery and corruption, which all play an important role in
mitigating non-compliance and reputation risks;
\u25a0 Responsibility Charter:
Executive Management drew up a formal Responsibility Charter,
inspired by the Group's core values (the \"BNP Paribas Way\"),
management principles and Code of conduct. One of the four
commitments is \"Being prepared to take risks, while ensuring close
The Group sees rigorous risk control as part of its responsibility, both to
clients and to the financial system as a whole. The Bank's decisions on
the commitments it makes are reached after a rigorous and concerted
process, based on a strong, shared risk culture which pervades all
levels of the Group. This is true both for risks linked to lending
activities, where loans are granted only after in-depth analysis of the
borrower's situation and the project to be financed, and for market
risks arising from transactions with clients \u2013 these are assessed on
a daily basis, tested against stress scenarios, and subject to limits.
As a strongly diversified Group, both in terms of geography and
businesses, BNP Paribas is able to balance risks and their consequences
as they materialise. The Group is organised and managed in such a
way that any difficulties arising in one business area will not jeopardise
\u25a0 the Group's mission and commitments:
The mission of BNP Paribas is to finance the economy and advise its
clients, by supporting them with their projects, their investments, and
the management of their savings, guided by strong ethical principles.
Through these activities, BNP Paribas wants to have a positive impact
on stakeholders and on society, and be one of the most trustworthy
players in the sector. BNP Paribas' 12 commitments as a Responsible
Bank include in particular the commitment to apply the highest
ethical standards and rigorously manage environmental, social, and
governance risks (see section 7.2 Economic Responsibility: financing
the economy in an ethical manner).
SPREADING THE RISK CULTURE
Robust risk management and control is an integral part of the Bank's
principles. A culture of risk management and control has always been
one of its top priorities.
In addition to the various training programmes in support of this ambition,
there are numerous awareness and acculturation initiatives at global
and local level within different entities. These include some examples
of teams of experts dedicated to acculturating employees to new
developments in certain risk categories: cyber risks, ESG risks, legal risks.
BNP Paribas launched the Risk Culture, a Group-wide initiative, giving
it the objective of reinforcing the communication of the best practices
in risk management. Sponsored by four functions: Compliance, LEGAL,
Human Resources (HR), and RISK, Risk Culture is designed for the benefit
of all staff and intervenes on all types of risks to which the Group may be
exposed, including credit, market, liquidity, operational, non-compliance,
regulatory, environmental and social risks.
Taking an adaptive and participative approach, this initiative supports the
business lines and functions in their process of understanding risks, for
example in transformation projects or when onboarding new employees.
In particular, it takes special care to ensure that conduct and behaviour
requirements are well integrated, beyond the mission of transmitting
knowledge. It provides entities with resources that they can use for their
information, acculturation and support for employee skills development
in all aspects of the risk culture.
In conjunction with operating entities, Risk Culture actions mainly consist
\u25a0 ensuring the dissemination of information and professional
development in the area of risk management, by means of conferences
and the publication of educational articles or videos;
\u25a0 facilitating the sharing of knowledge between the various players in
the Bank, in particular changes in the Bank's business lines, news on
regulatory requirements and new ways of working. The experts of
the Group are invited to expand documentary resources which can
be accessed by employees through various communication channels
available within the Group;
\u25a0 relay, if necessary by adapting from one entity to another, actions to
raise awareness of good risk practices carried out on the initiative of
In all its initiatives, Risk Culture promotes the six fundamental risk
management practices that are key to developing a robust risk culture.
They serve as a reminder to staff about the importance of clearly
understanding and anticipating risks with a long-term perspective, being
disciplined with risks taken and reporting swiftly and transparently on
Lastly, the risk culture is also spread throughout the Group by linking
compensation to performance and risk (see chapter 7, section 7.3
A competitive compensation policy), under a system that was
strengthened in this area since 2015 for those employees whose decisions
entail a significant risk component.
DEFINITION AND OBJECTIVES
The Group does not have a specific risk appetite target, but some risks are
inherent to its business and therefore to the achievement of its strategic
objectives. It has prepared a Risk Appetite Statement and Risk Appetite
Framework, which should be seen as the Group's formal statement of its
tolerance to the risks to which it is exposed as it implements its strategy.
The Risk Appetite Statement is approved on a yearly basis, or more
frequently if necessary, by the Board of directors on the proposal of
Executive Management. Consistent with the Group's strategy and in light
of the environment in which it operates, this document sets out the
qualitative risk principles it intends to follow in its business activities,
as well as a quantitative mechanism for supervising the Group's risk
profile indicators through quantitative metrics and thresholds. This
system covers both the quantifiable and non-quantifiable risks to which
The Group's risk appetite is determined by Executive Management,
during various committees it chairs (CCDG, FMRC, Group ALCo, Capital
Committee), which are tasked with managing the Group's different types
of risk exposure. The Group's strategic processes, such as budget, capital
and liquidity management, are in line with the Risk Appetite Statement.
Certain Risk Appetite Statement indicators are included in the budget
exercise and their expected values in the budget are cross-checked
against the thresholds in the Risk Appetite Statement.
The Group's Risk Appetite Statement reflects the core values of its risk
culture. It states that the Group's risk culture and its commitments as a
responsible bank are at the heart of its strategy. The statement reaffirms
the Group's mission: to finance the economy, advise its clients and help
to finance their projects, guided by strong ethical principles. The Group's
strategy underpinning its risk appetite is founded on the core principles
that have guided its development: a balance between business activities
to deliver profitability and stability, a customer-focused business model
and an integrated banking model to optimise services to the latter. This
strategy also factors developments in the banking industry, including the
trend towards a digital model, and a macroeconomic situation marked
by higher inflation and interest rates than in recent years, in a context of
particularly critical geopolitical risk, while certain sectors of the economy
show higher levels of risk.
The risk principles aim to define the types of risk the Group is prepared
to accept in support of its business strategy.
They include the following in particular:
\u25a0 diversification and risk-adjusted profitability:
The Group seeks to generate sustainable, client-driven, risk adjusted
profits. Sustainable profitability will be achieved based on selectivity
and controlled evolution of BNP Paribas assets, and the pursuit of a
diversified business model. Whilst the Group accepts some level of
earnings volatility, it remains attentive to contain, at all times, the
level of maximum potential losses in an adverse scenario;
\u25a0 solvency and profitability:
BNP Paribas has sufficient capital to cope with stress scenarios and
to meet regulatory capitalisation standards in force. In the course of
serving its clients, BNP Paribas accepts exposure to risks when it earns
a proper return over an acceptable time frame, and when its potential
\u25a0 funding and liquidity:
the Group ensures that the diversification of and balance between
its resources and uses of funds correspond to a conservative funding
strategy, allowing it to withstand adverse liquidity scenarios. The Group
makes sure that it complies with the regulatory liquidity ratios in force;
The Group only accepts exposure on customers it knows well, based on
comprehensive information, and pays close attention to the structure
of the financing it grants. The Group builds and maintains a diversified
risk portfolio, avoiding large concentrations (especially on single
names, industries and countries) and ensures that it complies with
the concentration policies in force;
The Group manages market risks (interest rates, equities, currencies,
commodities) within the following framework:
for activities in the capital markets that are customer-focused,
BNP Paribas intends to keep its market risk profile in line with this
customer-focused business mode,
interest rate risk associated with its banking book with the aim
of stabilising its results on an ongoing basis to within acceptable
The Group aims to protect its customers, employees and shareholders
from operational risk. To do so it has developed a risk management
infrastructure based on identifying potential risks, strategies to mitigate
risk, and actions to raise awareness of these risks. Some specific risks
have resulted in the definition of dedicated principles, in particular:
The Group is committed to compliance with all applicable laws and
regulations. It undertakes to implement a system to manage the risk
of non-compliance, including through special programs dedicated
to the most important regulations for its business,
information, communication and technology risk:
The Group endeavours to reduce the risks related to the security
of its information through various awareness actions, enhanced
supervision of outsourced activities, heightened protection of
terminals, incident monitoring, and a technology watch over IT
vulnerabilities and attacks;
\u25a0 insurance activities:
BNP Paribas Cardif is exposed mainly to credit, underwriting and
market risks. The entity closely monitors its exposures and profitability,
taking into account its risks and the adequacy of its capital with regard
to solvency rules. It endeavours to contain potential losses in adverse
scenarios at acceptable levels;
\u25a0 risk associated with social and environmental responsibility:
The Group is particularly sensitive to its customers' performance
in terms of social and environmental responsibility, believing that
this could have a material impact on its customers' risk profile
and, consequently, their solvency, in addition to being a major
reputational risk. BNP Paribas takes social and environmental risks
into consideration when assessing customer-related risks. The Group
also tracks these risks as part of the conduct of its own business, the
conduct of its counterparties' business and of its investments on its
own behalf or on behalf of third parties.
SUPERVISION OF RISK PROFILE INDICATORS
The Risk Appetite Statement sets out the indicators that measure the
Group's risk profile for its risk exposure categories.
Risk level thresholds are assigned to each metric. When these thresholds
are reached, they trigger an established process to inform Executive
Management and the Board of directors, and if need be, to implement
These indicators are monitored quarterly in the risk dashboards
For example, the following ratios (described in the Key figures of
section 5.1 Annual Risk survey) are included in the Risk Appetite
\u25a0 the solvency ratios (CET1, Tier 1, total own funds, TLAC, MREL and
\u25a0 the balance of the breakdown of risk-weighted assets by business line;
\u25a0 the cost of risk on loans outstandings (in annualised basis points) and
doubtful loans on gross outstandings ratio;
\u25a0 the liquidity ratios (LCR and NSFR).
To ensure dynamic risk supervision and management, the Group has
implemented a comprehensive stress testing framework.
The stress testing framework forms an integral part of the risk
management and financial monitoring system and is used with a
threefold objective of forward-looking risk management, planning of
regulatory resources and liquidity requirements, and optimisation of the
deployment of these resources within the Group, mainly through the
Group's and its main entities' ICAAP and ILAAP processes.
Different types of stress tests
There are two types of stress tests:
\u25a0 regulatory stress tests:
These involve primarily the stress tests requested by the European
Banking Authority, the European Central Banks, or any other supervisory
In 2023, BNP Paribas took part in the EU-wide stress test organized
by the European Banking Authority and the European Central Bank.
The exercise was conducted across a panel of 70 banks representing
75% of total assets of the banking system in the European Union. As
in previous years, macroeconomic scenarios and a certain number of
methodological assumptions were applied to all banks for comparison
purposes. A macroeconomic stress scenario was used to test the impact
on exposure to credit, market and operational risks, and revenue (net
interest income and commissions) and applied to the P&L account,
risk weighted assets and capital aggregates.
In 2022, the ECB had conducted a climate stress test among 104
financial institutions under its supervision. The ECB did not disclose
any bank-specific information. The exercise demonstrated the good
level of progress achieved by BNP Paribas in climate stress testing.
The Group recognises the revelance of scenario analysis to assess
the possible impacts of climate risk, given its forward-looking nature.
The Group however also considers that climate stress testing is a
developing activity, which is less mature than traditional stress tests
involving macro-economic or capital markets scenarios. Results of
climate scenarios analyses should be used in a way that reflects this
BNP Paribas has participated in early 2024 in the One-off Fit-for-55
climate risk scenario analysis organised by the European Banking
Authority under the mandate it received jointly with EIOPA and ESMA
from the European Commission to assess the ability of the European
financial sector to participate in the financing of energy transition, and
more specifically the level of investment required for the European
Union to meet its commitment of reducing greenhouse gas emissions
In 2024, BNP Paribas will also participate in the Cyber Resilience Stress
Test organised by the European Central Bank.
\u25a0 internal stress tests:
stress tests dedicated to risk anticipation: they contribute to the
forward-looking risk management, in particular of credit, market,
counterparty, interest rates in the banking book, operational, activity
and liquidity risks. The results of the transverse stress tests are
used, among other purposes, to formulate the Bank's risk appetite
and periodically measure its risk profile. They are periodically
submitted to Group Executive Management as well as the Board
of directors' Internal Control, Risk Management and Compliance
Committee (CCIRC) through the quarterly Group risk dashboard.
Moreover, ad hoc stress testing is performed, when appropriate,
within Risk & Development Policy Committees, portfolio reviews
or Country Strategic Committees to identify and assess areas of
vulnerability within the Group's portfolios,
stress tests for the budget process: they contribute to three-year
capital planning. Stress tests are carried out annually as part of
the budget process and are included in the ICAAP and the ILAAP.
They are reviewed at divisional and business line level before being
consolidated at Group level to provide a comprehensive view of the
impact on the Bank's capital, liquidity and earnings.
The calculated final output is a range of projected Group's
solvency ratios, as well as possible adjustment measures. The
scenarios used, the outcomes of the stress tests and the proposed
possible adjustment measures (such as reducing exposures to a
sub-segment, cost reduction initiatives, or changes in funding or
liquidity policies, etc.) are included in the budget synthesis report
presented to the Group Executive Management and to the Board of
directors at the end of the budget process. In addition, in the Group's
ICAAP, its solvency can be analysed in adverse scenarios other than
an adverse budget scenario, defined by risk topics occasionally
reverse stress tests: they are conducted as part of the Bank's
recovery and resolution plan and ICAAP. Reverse stress tests consist
of identifying scenarios likely to result in a drop in the Bank's
solvency ratios to levels set in advance in line with the methods of
use in question. These exercises enable any areas where the Bank
is fragile in terms of changes in certain risk factors to be detected
and facilitate in-depth analyses of the remedial actions that could
be implemented by business lines or Group-wide.
Governance and implementation
This stress testing framework is based on a well-defined governance,
with responsibilities shared between the Group and operating entities
in order to encourage operational integration and relevance and in
particular to develop internal stress test practices required for proper
risk management and Group resource planning.
Finance, RISK and ALM Treasury functions have created a shared team,
Stress Testing and Financial Simulations (\"STFS\"), responsible for
developing stress testing, ICAAP, internal capital and capital planning
across the Group's entities and activities.
The STFS team is responsible in particular for:
\u25a0 the definition and the implementation of the Group's target structure
in terms of stress testing and ICAAP while covering the associated
organisational issues, modelisation, IT systems and governance;
\u25a0 the performance of all of the Group's stress testing exercises, relying
in particular on existing teams within the RISK and Finance Functions;
\u25a0 the support of the stress test and ICAAP initiatives of the Group's
business lines and legal entities in order to ensure overall consistency
and streamline procedures;
\u25a0 the coordination of the Group's financial simulation system and its
adaptation to the challenges of SREP;
\u25a0 the Group's risk identification process;
\u25a0 the production of the Group's ICAAP report and, for certain risks, the
quantification of internal capital.
Stress test methodologies are tailored to the main categories of risk and
subject to independent review.
Stress tests may be run at Group, business line or portfolio level,
dedicated to one or more risk types and on a more or less large number
of variables depending on the pursued objective. Where appropriate, the
results of quantitative models may be adjusted on the basis of expert
Since its creation, the Group's stress testing framework has evolved
continuously in order to integrate the most recent developments in
stress tests, whether in terms of methodologies or improved operational
integration in the Group's management processes. The stress test
framework by type of risks is detailed in sections 5.4 Credit risk,
5.6 Counterparty credit risk and 5.7 Market risk. In this context, the Group
is engaged in the development of a climate stress testing infrastructure,
covering scenarios (see below), data and models and methodologies, as
well as encompassing both transition and physical risks, which are the
two main risk types into which climate risk materialises.
INTERNAL STRESS TEST SCENARIO
In stress testing exercises, it is common practice to distinguish the baseline
scenario from one or several alternative scenarios. A macroeconomic
scenario is typically a set of macroeconomic and financial variables (GDP
and its components, inflation, employment and unemployment, interest
and exchange rates, stock prices, commodity prices, etc.) projected over
Macroeconomic stress tests
The baseline scenario is considered as the most likely scenario over
the projection horizon. The baseline scenario is constructed by Group
Economic Research in collaboration with various functions and business
lines possessing a specific expertise, in particular:
\u25a0 Group ALM Treasury for interest rates;
\u25a0 Wealth Management for equity indices;
\u25a0 BNP Paribas Real Estate regarding commercial real estate;
\u25a0 local economists when regional expertise is required;
\u25a0 Stress Testing & Financial Simulations (STFS) for coordination and
overall consistency of the scenario.
The global scenario is made up of regional and national scenarios
(Eurozone, France, Italy, Belgium, Spain, Germany, United Kingdom,
Poland, T\u00fcrkiye, United States, Japan, China, India, Russia, etc.) consistent
Depending on the exercise, one or more alternative scenarios may be
STFS produces three types of alternative scenarios on a regular basis,
in collaboration with the same functions and business lines as those
requested in the central scenario: an adverse scenario, a severe scenario
and a favourable scenario.
\u25a0 The adverse scenario describes one or several potential shocks to
the economic and financial environment \u2013 i.e. the materialisation of
one or several risks to the baseline scenario \u2013 over the projection
horizon. An adverse scenario is thus always designed in relation to a
baseline scenario. The shocks associated with the adverse scenario
are translated in the set of macroeconomic and financial variables
listed above in the form of deviations from their value in the baseline
\u25a0 The severe scenario is an aggravated version of the adverse scenario.
\u25a0 The favourable scenario reflects the impact of the materialisation of
risks with a positive effect on the economy.
Construction of scenarios
The baseline, adverse, severe and favourable scenarios are revised
quarterly to monitor the Bank's risk appetite metrics and credit provision
calculations within the framework of IFRS 9 (see note 2. IFRS 17 and
IFRS 9 first time application impacts to the consolidated financial
They are validated in meetings involving the Group Executive
Management for scenarios used in the Group's budget process (second
and third quarters of the year). For the other two quarterly exercises in
March and December, scenarios are validated jointly by the Group Chief
Risk Officer and the Group Chief Financial Officer.
The scenarios are then used to calculate expected losses (or profit and
loss impact in the case of market risks) over the year for all Group
\u25a0 for portfolios exposed to credit or counterparty risk and for the equity
portfolio of the banking book: this calculation measures the impact of
the scenario on the cost of risk and risk-weighted assets due to the
deterioration of the portfolio quality resulting from the macroeconomic
scenario, or adverse moves in equity prices. Credit risk stress tests
are performed on the Bank's entire portfolio for all regions and all
prudential portfolios, namely Retail, Corporates and Institutions;
\u25a0 for market portfolios: the changes in value and their profit and loss
impact are calculated by simulating a one-time shock, which is
consistent with the overall scenario.
The above calculations and related methodologies for stress tests on
credit and market risks are coordinated centrally at Group level by STFS
team. They also involve various teams of experts at Group and territory's
levels in their implementation and design.
Lastly, in an adverse budget scenario, risks appertaining to the Group and
its business activities and not forming part of the adverse macroeconomic
scenario are added. They are identified and quantified either by the
Group's businesses or centrally for those likely to impact the Group as
Beyond macroeconomic stress tests, the field of climate stress tests is
developing rapidly. In this context, the Group is engaged in the analysis,
adaptation and creation of transition and physical risk scenarios.
With regard to the risk of transition, the analysis and adaptation works
are based at this stage on the work of the NGFS (Network for Greening
the Financial System), pioneer in this field. For the Group's internal
requirements in terms of climate stress tests, the NGFS scenarios can
be adjusted and adapted, so that they are more in touch with most recent
developments (e.g. at the macroeconomic level) or that they are more
specifically adapted to the Group's portfolios. In addition, in collaboration
with other companies and institutions, the Group is taking part in the
Iris initiative to define transition scenarios with more precise sectoral
aspects that are relevant to assess transition risk.
The physical risk scenarios used by the Group at this stage focus on
geographies with significant Retail Banking activities in Europe.
Market risk: rate risk and asset value variation
Sensitivity of the valuation of financial assets and liabilities related to insurance contracts, on the profit or loss and on equity to a variation of +/-50bps
of interest rates and to a variation of +/-10% of the equity market and real estate market.
The table below presents impacts before tax:
Potential impact on income
Potential impact on equity
contracts Netimpact investments
+50 bps variation of interest rate risk
-50 bps variation of interest rate risk
+10% variation of equity market
-10% variation of equity market
+10% variation of real estate market
-10% variation of real estate market
(1) Exceptfinancial assets representing unit-linked contracts.
The sensitivity was measured for most significant countries, i.e. France, Italy and Luxembourg.
For savings contracts measured under the variable fee approach, changes
in the value of underlying financial assets are largely offset by changes in
the value of liabilities, as contractual service margin is positive.
Potential impacts on profit and loss and equity are mainly due to non-
participating contracts and to assets backing insurance entities' equity.
Foreign exchange risk and hedging of net income
generated in foreign currencies [Audited]
So-called \"operating\" foreign exchange risk exposure relates to net
earnings generated by activities conducted in currencies other than the
functional currency of the entity concerned. The Group's policy is to hedge
the variability of its net income due to currency movements. To this end,
earnings generated in a currency other than the functional currency of
a given entity of the Group are hedged locally.
Foreign exchange risk and hedging of net
investments in foreign operations [Audited]
The so-called \"structural\" foreign exchange position of an entity relates
to investments in currencies other than the functional currency. This
position mainly results from the capital endowment of the branches
and equity investments in foreign currencies financed by buying the
investment currency. This structural foreign exchange position, adjusted
for any intangibles, constitutes patrimonial exposure.
The Group's policy is to hedge portfolio exposure to liquid currencies,
while at the same time maintaining the solvency ratio's limited sensitivity
to exchange rate fluctuations. For this, borrowings in the same currency
as the investment are used as an alternative to financing by purchasing
the currency in question. Borrowings are recognised as hedges of
INTEREST RATE RISK [Audited]
Interest rate risk in the banking book, or global interest rate risk, is
the risk of variability in results as a result of mismatches in interest
rates, maturities and nature between assets and liabilities in the
banking book. This risk arises in non-trading portfolios.
Organisation of the Group interest risk
The Board of directors assigns responsibility to the Chief Executive Officer
for management of interest rate risk in the banking book. The Board
of directors is informed quarterly on the principles governing interest
rate policy and the Group's position through the Internal Control, Risk
Management and Compliance Committee (CCIRC).
The Chief Executive Officer delegates management responsibility to
the Group ALM Treasury Committee (Asset and Liability Management
Committee). The permanent members of the Group ALM Treasury
Committee are the Group Senior Executive Advisor (Chairman), the Delegate
Deputy Chief Operating Officers, the Group Chief Risk Officer, the Group
Chief Financial Officer, the Group ALM Treasury Head. The Head of General
Inspection and the Head of Compliance are also invited. This committee is
responsible for tracking interest rate risk monitoring indicators, proposing
the Group's interest rate risk profile and assigning limits.
ALM Treasury is responsible for the analysis of the management proposals
and operational implementation of decisions related to managing the
interest rate risk of the banking book as part of its delegated management.
The RISK Function participates in the Group ALM Treasury Committee and
the local ALM Treasury Committees (ALCo) and oversees implementation
by ALM Treasury of the relevant decisions made by these committees.
It also provides second-line control by reviewing the models and risk
indicators, monitoring the level of risk indicators and ensuring compliance
with the limits assigned.
The banking book consists of the Group's total bank balance sheet,
excluding trading book transactions. This includes intermediation
transactions (deposits, loans, etc.), non-commercial balance sheet items
(equity, fixed assets,etc.) and banking book risk management activities,
including derivatives used for the management of interest rate risk on
the banking book (notably when they are ineligible for hedge accounting
Banking book interest rate risk in each BNP Paribas entity is systematically
transferred to ALM Treasury, through internal analytic contracts or
lending/borrowing transactions. For the Group as a whole, ALM Treasury
is responsible for managing the interest rate risk transferred in this way.
Decisions concerning the management of interest rate risk are made and
monitored during monthly or quarterly committee meetings by entity
or group of entities, attended by representatives of local ALM Treasury,
Group ALM Treasury, FINANCE & STRATEGY and RISK Functions and senior
management of the entities and/or businesses.
Measurement of interest rate risk
Rate positions are measured taking into account the specific features of
the risks managed. Hence, the Group has defined the concepts of standard
rate risks and structural rate risks. The standard rate risk corresponds
to the general case, namely when it is possible to define uniquely the
most appropriate hedging strategy for a given transaction. The structural
rate risk is the interest rate risk for equity and non-interest-bearing
current accounts: the investment of these balance sheet items generates
regular revenues but are sensitive to interest rate levels. However, it is
not possible to define a single hedging strategy to fully neutralise this
sensitivity. In this case, the Group included all the possible so-called
\"neutral\" management strategies in terms of interest rate risk.
Interest rate risks are analysed in terms of interest rate gaps that measure
for each future period the potential rate characteristic mismatches
between assets and liabilities (fixed rate and indexation type). In the
interest rate gaps, the optional effects, in particular linked to behavioural
options, are embedded and translated into their delta equivalent. Value
indicators are also used.
The maturity split is determined on the basis of the contractual terms
of the transactions and observations of customer behaviour. For Retail
Banking products, behavioural models are based on historical or forward
data and econometric studies. These possible management strategies
notably relate to early redemption and savings accounts. Moreover, the
maturities of non-interest-bearing current accounts and of equity are
calculated according to a more conventional approach defining a range
of investments taking into account the objective of stabilising results and
stability of deposits. For current accounts, average maturities are less
than five years and the proportion invested beyond 10 years is negligible.
Incorporating dynamic changes in balance sheet items, the interest
rate risk is measured through indicators of the sensitivity of revenues
to interest rate changes on a going concern basis. This enables the
partial or zero correlation between customer interest rates and market
interest rates to be taken into account on the one hand, and the volume
sensitivities to interest rates on the other hand, which create a risk to
The choice of indicators and risk modelling are reviewed by RISK. The
results and the adjustments following these reviews are presented and
monitored to the committees on a regular basis.
The interest rate risk measurement indicators are consistently presented
to the ALCos and serve as the basis for operating risk management
Interest rate risk indicators span the entire banking book as at
The interest rate gaps are subject to interest rate risk limits across all
time horizons. These limits are calibrated based on the nature of the risks
(standard or structural) at Group and entity level. They are reviewed
The Group's revenue sensitivity indicator is subject to limits and a
warning threshold relative to the overall sensitivity level, also broken
down by division and the main entities. Moreover, the Group regularly
monitors the impact of stress scenarios on its revenues.
Economic hedges transactions that do not qualify for hedge accounting
under IFRS are subject to specific limits.
Sensitivity of revenues to global interest rate risk
Net interest income sensitivities are calculated on the total banking
book, over one-, two- and three-year rolling timeframes notably, for a
parallel, instantaneous and definitive increase and decrease in market
rates on all currencies over all the terms of
These sensitivities are measured as deviations from the NII projection for
the central rate scenario corresponding to future interest rates expected
by the markets at estimation date (e.g. forward rates seen at the end of
December 2023 for sensitivities at the end -2023). Other scenarios are
also used to measure NII sensitivities, including instantaneous, parallel
The sensitivities include the direct impacts of market rates and business
trends. Indirect effects on commercial activity linked to changes in
outstandings and customer rates, are also taken into account. Thus, for
the sake of prudence, increases in sight non-interest-bearing current
account balances, observed during the period of low or negative interest
rates, are considered as situational to the low interest rates environment,
and are assumed to decrease gradually when short-term rates return to
sufficiently positive levels. Having maintained interest rates at significant
positive levels, has gradually led to sensitivities levels that existed before
the low interest rate environment, as illustrated below by end -2023
sensitivities (end -December interest rates being punctually at lower
levels compared to previous and subsequent weeks).
TABLE 90: SENSITIVITY OF REVENUES TO GLOBAL INTEREST RATE RISK BASED ON A 50 BASIS POINTS INCREASE OR
DECREASE IN THE INTEREST RATES (EU IRRBB1A) [Audited]
Sensitivity of the value of the net assets of the
banking intermediation activity
As the assets and liabilities of the Group's banking intermediation
business are not intended to be sold, they are not recognised or managed
on the basis of their theoretical economic value measured by discounting
future cash flows. Similarly, the theoretical economic value of the net
assets does not affect the Group's capital.
However, pursuant to the regulatory requirements and calculation
methods laid down by the European Banking Authority (EBA), the ratios
of sensitivity of the theoretical economic value of the net assets of
the intermediation business in relation to Tier 1 capital are regularly
calculated through 6 interest rate scenarios defined by the EBA (i.e.
parallel up/down, steepening/flattening, short rates up/down). Moreover,
the EBA defines thresholds for risk-free rates by maturity (interpolated
yield curve between -1.5% for the overnight rate and 0% for the 50-year
yields) These ratios are compared to the -15% threshold used by the
supervisor to identify situations where the interest rate risk in the banking
The ratios at end-December 2023 are presented in the table below and
are significantly below the materiality threshold of -15%. In the event
of parallel down interest rate scenario, the ratio decreases compared to
end-December 2022 and stands at -5.4%.
Structural foreign exchange risk [Audited]
Currency hedges are contracted by the ALM Treasury in relation to the
Group's investments in foreign currencies and its future foreign currency
revenues. Each hedging relationship is formally documented at inception.
The documentation describes the hedging strategy, identifies the hedged
item and the hedging instrument, and the nature of the hedged risk and
describes the methodology used to test the expected (prospective) and
actual (retrospective) effectiveness of the hedge.
A hedging relationship is applied and documented for investments in
subsidiaries and branches financed by foreign currency loans so as to
record movements in exchange rates symmetrically and avoid impacts
on the profit and loss account. In this context, these instruments are
designated as net investment hedges. The amount of these loans stood
at EUR 16 billion at 31 December 2023, compared with EUR 23 billion at
31 December 2022. The changes in value related to exchange differences
recognised directly in equity with respect to these hedges amounted
to +EUR 339 million in 2023, compared with -EUR 303 million at
During the 2023 financial year, no net investment hedging relationships
The amount recorded in the profit and loss account for 2023 with respect
to the ineffective portion of hedges of net investments is immaterial.
Hedging of financial instruments recognised
in the balance sheet (Fair Value Hedge)
Fair value hedges of interest rate risks relate either to identified fixed-
rate assets or liabilities, or to portfolios of fixed-rate assets or liabilities.
Derivatives are contracted to reduce the exposure of the fair value of
these instruments to changes in interest rates.
Individual assets hedging consists mainly of securities classified as
\"Financial assets at amortised cost\" or \"Financial assets at fair value
through equity\"; individual liabilities hedging consists mainly of fixed-
income securities issued by the Group.
Hedges of portfolios of financial assets and liabilities, constructed by
\u25a0 fixed-rate loans (property loans, equipment loans, consumer credit
\u25a0 fixed-rate deposits (mainly demand deposits and funds deposited
under home savings contracts).
To identify the hedged amount, the residual balance of the hedged item is
split into maturity bands, and a separate amount is designated for each
band. The maturity split is determined on the basis of the contractual
terms of the transactions and historical observations of customer
behaviour (early redemption assumptions and estimated default rates).
Demand deposits, which do not bear interest at contractual rates, are
qualified as fixed-rate medium-term financial liabilities. Consequently, the
value of these liabilities is sensitive to changes in interest rates. Estimates
of future cash outflows are based on historical analyses.
For each hedging relationship, expected hedge effectiveness is measured
by ensuring that for each maturity band, the fair value of the hedged
items is greater than the fair value of the designated hedging instruments.
Actual effectiveness is assessed on an ex-post basis by ensuring that the
monthly change in the fair value of hedged items since the start of the
month does not indicate any over-hedging.
In terms of interest rate risk, the Group uses derivative instruments
to hedge fluctuations in income and expenses arising on floating-rate
assets and liabilities. Highly probable forecast transactions are also
hedged. Hedged items are split into maturity bands by currency and
benchmark interest rate. After factoring in early redemption assumptions
and estimated default rates, the Group uses derivatives to hedge some
or all of the risk exposure generated by these floating-rate instruments.
In terms of foreign exchange risk, the Group hedges against variability
in components of consolidated net income. In particular, the Group may
hedge future revenue flows (especially interest income and fees) derived
from operations carried out by its main subsidiaries and/or branches
in a currency other than their functional currencies. As in the case of
interest rate hedges, the effectiveness of these hedging relationships
is documented and assessed on the basis of forecast maturity bands.
The table below concerns the scope of BNP Paribas SA's medium- and
long-term transactions and shows the amount of hedged future cash
flows (split by forecast date of realisation), which constitute the majority
of the Group's hedging transactions.
TABLE 92: HEDGED CASH FLOWS [Audited]
In 2023, no cash flow hedges were declassified on the grounds that achieving these future earnings would no longer be highly probable.
LIQUIDITY RISK MANAGEMENT POLICY [Audited]
The objectives of the Group's liquidity management policy are to secure
a balanced financing structure for the development of BNP Paribas
business activities, and to ensure it is sufficiently robust to cope with
The liquidity risk management framework relies on:
\u25a0 management indicators:
by volume, to ensure that businesses or activities comply with their
liquidity targets set in line with the Group's funding capacity,
by price, via internal liquidity pricing;
\u25a0 the definition of monitoring indicators which enable assessment of
the Group's liquidity position under normal conditions and in crisis
situations, the efficiency of actions undertaken and compliance with
\u25a0 the implementation of liquidity risk management strategies based on
diversification of funding sources with maturities in line with needs,
and the constitution of liquidity reserves.
The Group's liquidity policy defines the management principles that apply
across all Group entities and businesses and across all time horizons.
As for all risks, the Group Chief Executive Officer is granted authority by
the Board of directors to manage the Group's liquidity risk. The Chief
Executive Officer delegates this responsibility to the Group ALM Treasury
The Internal Control, Risk Management and Compliance Committee
(CCIRC) reports quarterly to the Board of directors on liquidity policy
principles and the Group's liquidity position.
The Group ALM Treasury Committee is responsible for:
\u25a0 proposing the Group's liquidity risk profile at the CCIRC and the Board
of directors, for review and decision;
\u25a0 monitoring compliance with regulatory liquidity ratios;
\u25a0 defining and monitoring management indicators and calibrating the
quantitative thresholds set for the Bank's businesses;
\u25a0 defining and monitoring liquidity risk indicators and associating
quantitative thresholds to them if necessary;
\u25a0 defining and overseeing implementation of liquidity risk management
strategies, including monitoring of business lines, under normal and
In particular, the Group ALM Treasury Committee is informed about
funding programmes and programmes to build up liquidity reserves,
simulations in crisis conditions (stress tests), and about all events that
may arise in crisis situations.
The Group ALM Treasury Committee is tasked with defining the
management approach in periods of crisis (emergency plan). This
\u25a0 supervision of the emergence of a crisis by monitoring the market
position and complying with thresholds set for a series of indicators;
\u25a0 governance of the activation of crisis management mode and the
associated responsibilities;
\u25a0 identification of possible actions for managing a crisis.
The Group ALM Treasury Committee meets every month under normal
conditions and more often in stressed conditions or to deal with specific
The permanent members of the Group ALM Treasury Committee are the
Group Senior Executive Advisor (Chairman), the Delegate Deputy Chief
Operating Officers, the Chief Risk Officer, the Group Chief Financial Officer
and the Group ALM Treasury Head. Other members represent the RISK
Function, Finance & Strategy Function and ALM Treasury. The Head of
General Inspection and the Head of Compliance are also invited.
Across the Group, ALM Treasury is responsible for the operational
implementation of the Group ALM Treasury Committee's liquidity
management decisions. The ALM Treasury Committees in entities or
groups of entities are responsible for local implementation of the strategy
decided by the Group ALM Treasury Committee to manage the Bank's
ALM Treasury is responsible for managing liquidity for the entire Group
across all maturities. In particular, it is responsible for funding and
short-term issuance (certificates of deposit, commercial paper, etc.),
for senior and subordinated debt issuance (MTNs, bonds, medium/
long-term deposits, covered bonds, etc.), preferred share issuance, and
loan securitisation programmes for the Group. ALM Treasury is tasked
with providing internal funding to the Group's divisions, operating entities
and business lines, and investing their surplus cash. It is also responsible
for building up and managing liquidity reserves, which comprise assets
that can be easily sold in the event of a liquidity squeeze.
RISK participates in the Group and local ALM Treasury Committees and
oversees implementation by ALM Treasury of the relevant decisions made
by these committees. It provides second-line control by reviewing the
models and risk indicators (including liquidity stress tests), monitoring
risk indicators and ensuring compliance with the limits assigned.
Finance is responsible for producing the regulatory liquidity indicators,
as well as the internal monitoring indicators. Finance oversees the
consistency of the internal monitoring indicators with the objectives
defined by the Group ALM Treasury Committee. Finance takes also part
in the Group and local ALM Committees.
LIQUIDITY RISK MANAGEMENT AND SUPERVISION
Internal liquidity risk management and internal monitoring are based
on a large range of indicators at various maturities. These indicators are
measured on a regular basis by currency and maturity, both at Group
BUSINESS LINES' INTERNAL MONITORING
The management indicators relate tofunding needs of Group's Business
Lines under normal and stressed conditions. These indicators are part
of the Group's budget management framework, with targets and regular
(monthly) monitoring of the deviations from the objectives set.
Funding needs of the Group's businesses
The funding needs associated with the activity of the Group's businesses
are managed in particular by measuring the difference between
commercial funding needs (customer loans and overdrafts, trading
assets, etc.) and commercial funding resources (customer deposits,
sale of the Group's debt securities to customers, trading liabilities, etc.).
This indicator makes it possible to measure the business lines' liquidity
consumption under a normal business scenario.
It is supplemented by indicators to measure the funding needs of the
business lines in one month and one year depending on the assumptions
defined by European regulations in force (Liquidity Coverage Ratio) and
(Net Stable Funding Ratio).
In addition to this commercial funding need indicators, the Group closely
monitors the liquidity reserves and the refinancing provided by ALM
Treasury, as well as the Group's structural resources (i.e. net own funds).
The overall management of the business funding needs, the Group's
structural resources, funding and liquidity reserves made by the ALM
Treasury allows the Group to achieve a structurally robust liquidity
situation able to resist severe liquidity stresses.
Business lines' consumption of liquidity is thus integrated in the Group's
budget process, wherein each business line estimates its future liquidity
needs, in keeping with its profitability targets and capital consumption
objectives. During the iterative budget process, liquidity consumption
objectives are allotted to the business lines, taking into account the
funding provided by ALM Treasury and structural resources, in line with
the Group's overall target. This process is regularly renewed, monitored
and adjusted as appropriate throughout the year by the Group ALM
Internal liquidity pricing
All of the Group's assets and liabilities are subject to internal liquidity
pricing, the principles of which are decided by the Group ALM Treasury
Committee and aim to take account of trends in the cost of market
liquidity and the balance between assets and liabilities within the Group's
Change in the liquidity position
At end -2023, the businesses had a net liquidity surplus, as in 2022
(deposits higher than loans). Group's net equity is added to this surplus
leading to an overall liquidity surplus.
In this context, the funding provided by ALM Treasury is used to finance
the liquidity reserve, while also correcting the structural differences
between assets and liabilities (by maturity term) and covering TLAC
(Total Loss-Absorbing Capacity) requirements, as well as future Minimum
Requirement for own funds and Eligible Liabilities (MREL).
The Group maintains a large surplus in liquidity.
WHOLESALE FUNDING AND LIQUIDITY
RESERVE MONITORING INDICATORS [Audited]
Sources of wholesale funding
The Group adopted a broad definition of wholesale funding, covering all
funds excluding those provided by:
\u25a0 retail customers, professionals and corporates;
\u25a0 institutional clients for their operating needs (e.g. portion needed for
\u25a0 monetary policy and funding secured by market assets.
This definition is broader than market funding. For example, it includes
medium- to long-term debt placed in funds for individuals and, in the
short-term portion, non-operating deposits in the Securities Services
The Group has a conservative policy for the management of its wholesale
funding by ensuring that it does not depend on very short-term funding
and diversifying these funding sources.
Thus, wholesale funding with an original maturity of less than one month,
so-called very short-term wholesale funding, is systematically \"sterilised\"
by being placed in immediately-available deposits in central banks so
that it is not used to fund the Group's business.
The Group ensures that short-term wholesale funding (with original
maturity of between one month and one year) is diversified in terms
of counterparty, industry and residual maturity. Any excess concentration
on one of these criteria is systematically \"sterilised\" and placed in central
Medium- to long-term wholesale market funding (with original maturity
over one year) is diversified in terms of investor type, distribution network,
funding programme (secured or unsecured), and by geographical area to
ensure diversification. Furthermore, the Group aims to optimise the term
structure of its funding operations.
At end of 2023, sterilised very short-term wholesale funding totalled
EUR 70.9 billion (leading to the sterilisation of an equivalent amount in
the Group's liquidity reserve), diversified short-term wholesale funding
totalled EUR 137.4 billion and diversified medium-to long-term wholesale
funding totalled EUR 217.7 billion.
TABLE 93: BREAKDOWN OF THE WHOLESALE FUNDING BY CURRENCY [Audited]
The breakdown of funding by currency corresponds to the Group's needs and to a diversification objective.
Sterilised very short-term wholesale funding
Short-term wholesale funding
Medium- to long-term wholesale funding
Sterilised very short-term wholesale funding
Short-term wholesale funding
Medium- to long-term wholesale funding
determined ordemand Overnight) 3months
Cash and amounts due from central banks
Financial instruments at fair value through
Loans and repurchase agreements
Derivative financial instruments
Derivatives used for hedging purposes
Financial assets at fair value through equity
Financial assets at amortised cost
Loans and advances to credit institutions
Loans and advances to customers
Remeasurement adjustment on interest rate
of which Loans and advances
Deposit from central banks
Financial instruments at fair value through
Deposits and repurchase agreements
Derivative financial instruments
Derivatives used for hedging purposes
Financial liabilities at amortised cost
Deposits from credit institutions
Remeasurement adjustment on interest rate
Other non-financial liabilities
Liabilities associated with assets held for
TOTAL LIABILITIES AND EQUITY
FINANCING AND GUARANTEE COMMITMENTS
7.a FINANCING COMMITMENTS GIVEN OR RECEIVED
Financing commitments given
Confirmed financing commitments
Other commitments given to customers
TOTAL FINANCING COMMITMENTS GIVEN
of which insurance activities
of which financing commitments given associated with assets held for sale
Financing commitments received
TOTAL FINANCING COMMITMENTS RECEIVED
of which financing commitments received associated with assets held for sale
7.b GUARANTEE COMMITMENTS GIVEN BY SIGNATURE
Guarantee commitments given
Sureties provided to tax and other authorities, other sureties
TOTAL GUARANTEE COMMITMENTS GIVEN
of which insurance activities
The Group's annual contribution to the European Union's Single
Resolution Fund may be partly in the form of an irrevocable payment
commitment (IPC) guaranteed by a cash deposit of the same amount.
Where the resolution of an institution involves the fund, the fund may
call all or part of the IPC received.
The irrevocable payment commitment is qualified as contingent liabilities.
A provision is established if the probability of a commitment call by the
fund exceeds 50%. Since this probability is estimated to be below this
threshold, no provision was recognised by the Group at 31 December
These commitments amounted to EUR 1,261 million at 31 December 2023
(compared with EUR 969 million at 31 December 2022).
Cash provided as collateral is remunerated and recognised as a financial
7.c SECURITIES COMMITMENTS
In connection with the settlement date accounting for securities, commitments representing securities to be delivered or securities to be received are
Securities to be delivered
Securities to be received
7.d OTHER GUARANTEE COMMITMENTS
FINANCIAL INSTRUMENTS GIVEN AS COLLATERAL
Financial instruments (negotiable securities and private receivables) lodged with central banks
and eligible for use at any time as collateral for refinancing transactions after haircut
Used as collateral with central banks
Available for refinancing transactions
Securities sold under repurchase agreements
Other financial and similar assets pledged as collateral for transactions with credit institutions,
financial customers or subscribers of covered bonds issued by the Group(1)
(1) Notablyincluding \"Soci\u00e9t\u00e9 de Financement de l'\u00c9conomie Fran\u00e7aise\" and \"Caisse de Refinancement de l'Habitat\" financing.
The fair value of financial instruments given as collateral or transferred under repurchase agreements by the Group that the beneficiary is authorised
to sell or reuse as collateral amounted to EUR 726,703 million at 31 December 2023 (EUR 523,321 million at 31 December 2022).
FINANCIAL INSTRUMENTS RECEIVED AS COLLATERAL
Financial instruments received as collateral (excluding repurchase agreements)
of which instruments that the Group is authorised to sell and reuse as collateral
Securities received under repurchase agreements
The fair value of financial instruments received as collateral or under repurchase agreements that the Group effectively sold or reused as collateral
amounted to EUR 377,078 million at 31 December 2023 (compared with EUR 307,886 million at 31 December 2022).
Main Defined-contribution pension plans
The BNP Paribas Group has implemented over the past few years a wide
campaign of converting defined-benefit plans into defined-contribution
Thus, in France, the BNP Paribas Group pays contributions to mandatory
state and complementary pension schemes. BNP Paribas SA and certain
subsidiaries have set up a complementary defined-contribution pension
plan under a company-wide agreement. Under this plan, employees will
receive an annuity or a lump sum on retirement in addition to the pension
paid by mandatory schemes.
Since defined-benefit plans have been closed to new employees in most
countries outside France, they are offered the benefit of joining defined-
contribution pension plans.
In Italy, the plan introduced by BNL is funded by employer contributions
(4.2% of salaries) and employee contributions (2% of salaries). Employees
can also make additional voluntary contributions.
In the United Kingdom, the employer contributes 12% of salaries for
the majority of employees; employees can make additional voluntary
In the US, the bank matches the voluntary contributions made by
employees, within certain limits.
The amount paid into defined-contribution post-employment plans for
the year ended 31 December 2023 was EUR 791 million, compared with
EUR 720 million for the year ended 31 December 2022 (including amount
paid by entities which are insurance companies).
The breakdown by major contributors is determined as follows:
9.a CHANGES IN SHARE CAPITAL AND EARNINGS PER SHARE
At 31 December 2023, the share capital of BNP Paribas SA amounted to EUR 2,294,954,818 and was divided into 1,147,447,409 shares. The nominal
value of each share is EUR 2 (compared to 1,234,331,646 at 31 December 2022).
Ordinary shares issued by BNP Paribas and held by the Group
Shares held at 31 December 2021
Shares held at 31 December 2022
Shares held at 31 December 2023
(1) Transactionsrealised in the framework of an activity of trading and arbitrage transactions on equity indices.
Throughout the year 2023, BNP Paribas SA bought back on the market
then cancelled 86,854,237 of its own shares in accordance with the
decision made by the Board of directors on 6 February 2023.
At 31 December 2023, the Group holds 946,529 BNP Paribas shares
representing an amount of EUR 51 million, which were deducted from
Undated super subordinated notes eligible
as Tier 1 regulatory capital
BNP Paribas SA has issued undated super subordinated notes which pay
a fixed, fixed adjustable or floating-rate coupon and are redeemable at
the end of a fixed period and thereafter at each coupon date or every
On 3 January 2022, BNP Paribas SA redeemed the July 2006 issue, for an
amount of EUR 150 million. These notes paid a 5.45% fixed-rate coupon.
On 12 January 2022, BNP Paribas SA issued undated super subordinated
notes for an amount of USD 1,250 million which pay a 4.625% fixed-rate
coupon. These notes could be redeemed at the end of a period of 5 years.
If the notes are not redeemed in 2027, a US 5-year Constant Maturity
Treasury rate coupon will be paid half-yearly. This issue is eligible to
Additional Tier 1 capital.
On 19 January 2022, BNP Paribas SA redeemed the June 2007 issue, for
an amount of USD 1,100 million. These notes paid a 7.195% fixed-rate
On 14 March 2022, BNP Paribas SA redeemed the December 2016 issue,
for an amount of USD 750 million. These notes paid a 6.75% fixed-rate
On 17 June 2022, BNP Paribas SA redeemed the June 2015 issue, for an
amount of EUR 750 million, at the first call date. These notes paid a
6.125% fixed-rate coupon.
On 16 August 2022, BNP Paribas SA issued undated super subordinated
notes for an amount of USD 2,000 million which pay a 7.75% fixed-rate
coupon. These notes could be redeemed at the end of a period of 7 years.
If the notes are not redeemed in 2029, a US 5-year Constant Maturity
Treasury rate coupon will be paid half-yearly. This issue is eligible to
Additional Tier 1 capital.
On 6 September 2022, BNP Paribas SA issued undated super subordinated
notes for an amount of EUR 1,000 million which pay a 6.875% fixed-
rate coupon. These notes could be redeemed at the end of a period of
7 years and 3 months. If the notes are not redeemed in 2029, a mid-swap
rate EUR 5-year coupon will be paid half-yearly. This issue is eligible to
Additional Tier 1 capital.
On 17 November 2022, BNP Paribas SA issued undated super subordinated
notes for an amount of USD 1,000 million which pay a 9.25% fixed-rate
coupon. These notes could be redeemed at the end of a period of 5 years.
If the notes are not redeemed in 2027, a US 5-year Constant Maturity
Treasury rate coupon will be paid half-yearly. This issue is eligible to
Additional Tier 1 capital.
On 11 January 2023, BNP Paribas SA issued undated super subordinated
notes for an amount of EUR 1,250 million which pay a 7.375% fixed-
rate coupon. These notes could be redeemed at the end of a period of
7 years. If the notes are not redeemed in 2030, a mid-swap rate EUR
5-year coupon will be paid half-yearly. This issue is eligible to Additional
On 28 February 2023, BNP Paribas SA issued undated super subordinated
notes for an amount of SGD 600 million which pay a 5.9% fixed-rate
coupon. These notes could be redeemed at the end of a period of 5 years.
If the notes are not redeemed in 2028, a SGD SORA 5-year rate coupon
will be paid half-yearly. This issue is eligible to Additional Tier 1 capital.
The following table summarises the characteristics of these various issues:
Currency (in millions of currency units)
EUR 5-year Mid-swap +4.645%
EUR 5-year Mid-swap +4.631%
(1) Netof shares held in treasury by Group entities.
BNP Paribas has the option of not paying interest due on these undated
super subordinated notes. Unpaid interest is not carried forward.
For notes issued before 2015, the absence of coupon payment is
conditional on the absence of dividend payment on BNP Paribas SA
ordinary shares or on undated super subordinated note equivalents
during the previous year. Interest due is payable once dividend payment
on BNP Paribas SA ordinary shares resumes.
The contracts relating to these undated super subordinated notes contain
a loss absorption clause. Under the terms of this clause, in the event of
insufficient regulatory capital, the nominal value of the notes may be
reduced in order to serve as a new basis for the calculation of the related
coupons until the capital deficiency is made up and the nominal value of
the notes is increased to its original amount.
The proceeds from these issues are recorded in equity under \"Capital
and retained earnings\". In accordance with IAS 21, issues denominated
in foreign currencies are recognised at their historical value based on
their translation into euros at the issue date. Interest on the instruments
is treated in the same way as dividends.
At 31 December 2023, the BNP Paribas Group held EUR 12 million
of undated super subordinated notes which were deducted from
Basic earnings per share are calculated by dividing the net income for the
period attributable to holders of ordinary shares by the weighted average
number of ordinary shares outstanding during the period. The net income
attributable to ordinary shareholders is determined by deducting the net
income attributable to holders of preferred shares.
Diluted earnings per share correspond to the net income for the period
attributable to holders of ordinary shares, divided by the weighted
average number of shares outstanding as adjusted for the maximum
effect of the conversion of dilutive equity instruments into ordinary
shares. In-the-money stock subscription options are taken into account
in the diluted earnings per share calculation, as are performance shares
granted under the Global Share-Based Incentive Plan. Conversion of these
instruments would have no effect on the net income figure used in this
calculation. All stock option and performance share plans are expired.
Net profit used to calculate basic and diluted earnings per ordinary share
(in millions of euros)(1)
Weighted average number of ordinary shares outstanding during the year
Effect of potentially dilutive ordinary shares
Weighted average number of ordinary shares used to calculate diluted earnings per share
Basic earnings per share (in euros)
of which continuing activities (in euros)
of which discontinued activities (in euros)
Diluted earnings per share (in euros)
of which continuing activities (in euros)
of which discontinued activities (in euros)
(1) Thenet profit used to calculate basic and diluted earnings per share is the net profit attributable to equity shareholders, adjusted for the remuneration
on the undated super subordinated notes issued by BNP Paribas SA (treated as preferred share equivalents), which for accounting purposes is handled as
dividends, as well as the related foreign exchange gain or loss impact recognised directly in shareholders' equity in case of repurchase.
The Board of directors will propose to the Annual General Meeting on
14 May 2024, a dividend per share of EUR 4.60 out of the 2023 net income
(against EUR 3.90 out of the 2022 net income).
The proposed distribution amounted to EUR 5,274 million, against
EUR 4,744 million paid in 2023.
This distribution is raised to 60% of the 2023 net income with a share
buyback programme of EUR 1,055 million, initiated on 4 March 2024,
after having received the authorisation from the European Central Bank.
9.c LEGAL PROCEEDINGS AND ARBITRATION
BNP Paribas (the \"Bank\") is party as a defendant in various claims,
disputes and legal proceedings (including investigations by judicial or
supervisory authorities) in a number of jurisdictions arising in the ordinary
course of its business, including inter alia in connection with its activities
as market counterparty, lender, employer, investor and taxpayer.
The related risks have been assessed by the Bank and are subject,
where appropriate, to provisions disclosed in note 5.n Provisions for
contingencies and charge; a provision is recognised when it is probable
that an outflow of resources embodying economic benefits will be
required to settle an obligation arising from a past event and a reliable
estimate can be made of the amount of the obligation.
The main contingent liabilities related to pending legal, governmental,
or arbitral proceedings as of 31 December, 2023 are described below.
The Bank currently considers that none of these proceedings is likely to
have a material adverse effect on its financial position or profitability;
however, the outcome of legal or governmental proceedings is by
definition unpredictable.
The Bank and certain of its subsidiaries are defendants in several actions
pending before the United States Bankruptcy Court for the Southern
District of New York brought by the Trustee appointed for the liquidation
of Bernard L. Madoff Investment Securities LLC (\"BLMIS\"). These actions,
known generally as \"clawback claims\", are similar to those brought by the
BLMIS Trustee under the U.S. Bankruptcy Code and New York state law
against numerous institutions, and seek recovery of amounts allegedly
received by BNP Paribas entities from BLMIS or indirectly through BLMIS-
related \"feeder funds\" in which BNP Paribas entities held interests.
As a result of certain decisions of the Bankruptcy Court and the United
States District Court between 2016 and 2018, the majority of the BLMIS
Trustee's actions were either dismissed or substantially narrowed.
However, those decisions were either reversed or effectively overruled
by subsequent decisions of the United States Court of Appeals for the
Second Circuit issued on 25 February 2019 and 30 August 2021. As a
result, the BLMIS Trustee refiled certain of these actions and, as of
end May 2023, has asserted aggregate claims of approximately USD
1.2 billion. BNP Paribas has substantial and credible defenses to these
actions and is defending against them vigorously.
Litigation was brought in Belgium by minority shareholders of the
previous Fortis Group against the Soci\u00e9t\u00e9 f\u00e9d\u00e9rale de Participations et
d'Investissement, Ageas and BNP Paribas seeking (amongst other things)
damages from BNP Paribas as restitution for part of the BNP Paribas
Fortis shares that were contributed to BNP Paribas in 2009, on the ground
that the transfer of these shares was null and void. On 29 April 2016,
the Brussels Commercial court decided to stay the proceedings until
the resolution of the pending Fortis criminal proceeding in Belgium. The
criminal proceeding, in which the Public Prosecutor had requested a
dismissal, is definitively closed, as the Council Chamber of the Brussels
Court of first instance issued on 4 September 2020 a ruling (which since
became final) that the charges were time-barred. Certain minority
shareholders are continuing the civil proceedings against BNP Paribas
and the Soci\u00e9t\u00e9 f\u00e9d\u00e9rale de Participations et d'Investissement before
the Brussels Commercial court; BNP Paribas continues to defend itself
vigorously against the allegations of these shareholders.
On 26 February 2020, the Paris Criminal Court found BNP Paribas Personal
Finance guilty of misleading commercial practice and concealment
of this practice. BNP Paribas Personal Finance was ordered to pay a
fine of EUR 187,500 and damages and legal fees to the civil plaintiffs.
On 28 November 2023, the Court of Appeal of Paris upheld the Paris
Criminal Court's decision relating to misleading commercial practice and
the concealment of those practices. As for the damages owed to the civil
plaintiffs, though the Court of Appeal of Paris adjusted the calculation
methodology, the majority of the damages had already been paid by
provisional enforcement of the Paris Criminal Court's judgment. An
agreement was also entered into with the \"Consommation Logement
Cadre de Vie\" association to settle the case with customers wishing to
9.f SIGNIFICANT RESTRICTIONS
IN SUBSIDIARIES, JOINT VENTURES
Significant restrictions related to the ability
of entities to transfer cash to the Group
The ability of entities to pay dividends or to repay loans and advances
depends, inter alia, on local regulatory requirements for capitalisation
and legal reserves, as well as the entities' financial and operating
performance. During 2023, none of the BNP Paribas Group entities were
subject to significant restrictions other than those related to regulatory
Significant restrictions relative to the Group's
ability to use the assets lodged in consolidated
Access to the assets of consolidated structured entities in which third-
party investors have invested is limited inasmuch as these entities' assets
are reserved for the holders of units or securities. These assets total EUR
42 billion at 31 December 2023 (EUR 37 billion at 31 December 2022).
Significant restrictions related to the Group's
ability to use assets pledged as collateral or
under repurchase agreements
The financial instruments pledged by the BNP Paribas Group as collateral
or under repurchase agreements are presented in notes 5.p and 7.d.
Significant restrictions related to liquidity
Significant restrictions related to liquidity reserves correspond to the
mandatory deposits placed with central banks presented in chapter 5 of
the Universal registration document under Liquidity risk.
Assets representative of unit-linked insurance
Assets representative of unit-linked insurance contracts designated as
at fair value through profit or loss, which amountes to EUR 95.8 billion
at 31 December 2023 (compared with EUR 88.5 billion at 31 December
2022 restated according to IFRS 17 and 9), are held for the benefit of the
holders of these contracts.
OUTSTANDING BALANCES OF RELATED-PARTY TRANSACTIONS
restated according to IFRS 17 and 9
Financial investments and other assets related to
Liabilities related to insurance contracts
FINANCING COMMITMENTS AND GUARANTEE COMMITMENTS
Financing commitments given
Guarantee commitments given
TOTAL FINANCING AND GUARANTEE COMMITMENTS
The Group also carries out trading transactions with related parties involving derivatives (swaps, options and forwards, etc.) and financial instruments
purchased or underwritten and issued by them (equities, bonds, etc.).
RELATED-PARTY PROFIT AND LOSS ITEMS
restated according to IFRS 17 and 9
Net income from insurance activities
Group entities involved in certain
post-employment benefit plans offered
In Belgium, BNP Paribas Fortis funds a number of pension schemes
managed by AG Insurance in which the BNP Paribas Group has a 25%
In other countries, post-employment benefit plans are generally managed
by independent fund managers or independent insurance companies,
and occasionally by Group companies, in particular BNP Paribas Asset
At 31 December 2023, the value of plan assets managed by Group
companies or by companies over which the Group exercises significant
influence was EUR 3,864 million (EUR 3,689 million at 31 December
2022). Amounts received by Group companies in the year to 31 December
2023 totalled EUR 5 million and were mainly composed of management
and custody fees (EUR 5 million at 31 December 2022).
REMUNERATION AND BENEFITS AWARDED TO THE GROUP'S CORPORATE OFFICERS AND TO DIRECTORS
REPRESENTING THE EMPLOYEES
Gross remuneration paid during the year including benefits in kind
Remuneration linked to the term of directorship (paid to the trade unions)
Welfare benefits: premiums paid by BNP Paribas during the year
Share-based payments: conditional long-term incentive plan (LTIP) - fair value at grant date(1)
(1) Valuationaccording to the method described in note 8.e.
At 31 December 2023, no corporate officer is eligible for a contingent
collective defined-benefit top-up pension plan.
Remuneration linked to the term of
directorship paid to members of the Board
Remuneration linked to the term of directorship paid to all members of
the Board of directors in 2023 amounts to EUR 1,540,000, unchanged
compared to 2022. The amount paid in 2023 to members other than
corporate officers was EUR 1,410,484 compared with EUR 1,413,560 in
Loans, advances and guarantees granted
to the Group's corporate officers
At 31 December 2023, the total outstanding loans granted directly
or indirectly to the Group's corporate officers and their spouse and
dependent children amounted to EUR 5,770,986 (EUR 5,179,096 at
31 December 2022). These loans representing normal transactions were
carried out on an arm's length basis.
9.l FEES PAID TO THE STATUTORY AUDITORS
Excluding tax, in thousands of euros
Deloitte PricewaterhouseCoopers
Statutory audits and contractual audits,
Consolidated subsidiaries
Services other than those required for their
statutory audit engagement, including
Consolidated subsidiaries
of which fees paid to statutory auditors
in France for the statutory audit and
of which fees paid to statutory auditors in
France for services other than those required
for their statutory audit engagements
Excluding tax, in thousands of euros
Deloitte PricewaterhouseCoopers
Statutory audits and contractual audits,
Consolidated subsidiaries
Services other than those required for their
statutory audit engagement, including
Consolidated subsidiaries
of which fees paid to statutory auditors
in France for the statutory audit and
of which fees paid to statutory auditors
in France for services other than those
required for their statutory audit
Audit fees paid to external auditors who are not part of the network of the external auditors certifying the individual and consolidated financial statements
of BNP Paribas SA, as mentioned in the above table, amount to EUR 3,990 thousand for the year 2023 (EUR 786 thousand in 2022). Variation is mainly
explained by the appointment of BDO as joint external auditor of the Personal Finance Business Line entities in 2023.
This year, services other than the ones required for the statutory audit mainly refer to issuance of attestation of accounting and financial information,
review of the quality of the internal control as per the international standards (such as ISAE 3402) within the framework of services provided to customers,
especially in the Securities and the Asset Management Business Lines, expertise on the Bank's transformation projects, technical consultations on specific
issues and assessment of the compliance of the entity's framework with Law/Regulation.
CAPITAL MANAGEMENT [Audited]
To ensure the Group's sustainability, the Bank must maintain an adequate
level of capital with respect to the risks to which it is exposed in the
course of its activities and strategy. Capital is a rare and strategic
resource, which requires stringent, clearly defined, rigorous management
according to an approach, which takes account of the needs and demands
of stakeholders, including shareholders, supervisors, creditors and
BNP Paribas' capital management:
\u25a0 is governed by policies and procedures which make it possible to
understand, document and supervise capital management practices
\u25a0 takes risk measurement into account to determine the use of the
\u25a0 considers capital requirements and resources under normal operating
conditions, as well as under situations of severe, but plausible stress;
\u25a0 presents a forward-looking vision of the Bank's capital adequacy to
the Executive Management;
\u25a0 allocates the capital constraint to the business lines in keeping with
their strategic objectives;
\u25a0 complies with the Internal Capital Adequacy Assessment Process
(ICAAP) and is consistent with the Risk Appetite Framework;
\u25a0 is monitored by an appropriate governance.
CAPITAL MANAGEMENT AT CENTRAL
BNP Paribas' capital management aims to ensure and verify that the
Group has adequate capital to comply with the regulatory capital ratios,
as well as specific requirements, for instance to operate as a Global
Systemically Important Bank. To ensure its capital adequacy, the Group
abides by the following principles:
\u25a0 maintaining the capital at an appropriate level in view of BNP Paribas'
activities, risk appetite, growth and strategic initiatives;
\u25a0 maintaining BNP Paribas' capital at a level which complies with
\u25a0 keeping a balance between capital adequacy and return on capital;
\u25a0 meeting its obligations to creditors and counterparties, at each due
\u25a0 continuing to operate as a financial intermediary.
The governance of the development, approval and update of the capital
planning process is handled by two committees:
\u25a0 the Risk-Weighted Assets Committee: it is jointly chaired by the
Chief Financial Officer and the Chief Risk Officer, and comprises the
operational divisions' Chief Financial Officers and Chief Risk Officers.
The committee meets quarterly to examine forecasts of the Group's
risk-weighted assets in the context of the budget cycle and updating
The Risk-Weighted Assets Committee is tasked with:
monitoring and discussing the forecasts of the Group's risk-weighted
assets for each business line,
identifying the main assumptions underlying these forecasts and
identifying any evolution factors and quantifying their impacts,
proposing adjustments if required;
\u25a0 the Capital Committee: it meets at least quarterly and is chaired by the
Group Chief Financial Officer. The committee's mission is to validate
the Group's targets in terms of solvency ratios and loss absorbing
capacity requirements in case of resolution (TLAC and MREL) as well
as the trajectory to achieve these targets; monitor compliance with
this trajectory; and, where necessary, propose corrective measures,
consistent with the Group's Risk Appetite Statement. The committee
ensures, in this respect, internal capital adequacy is taken into
account in the ICAAP as well as in the results of the global stress
The Capital Committee is tasked with:
monitoring, validating and anticipating changes in the business
lines' risk-weighted assets as well as changes in the Group's
prudential ratios, in central scenario and adverse scenario, and
monitoring these indicators relative to the Group's Risk Appetite,
which is stated in the Risk Appetite Statement. This includes
solvency ratios, leverage ratio, TLAC/MREL ratios, capital adequacy
of the financial conglomerate, etc.,
identifying any evolution factors and quantifying their impacts,
defining trends in short and medium terms capital consumption (at
least 3 years) and proposing or reporting the ensuing arbitrages to
the Group's Executive Committee,
monitoring internal capital adequacy as part of the ICAAP,
monitoring potential regulatory changes,
monitoring the sensitivity of the CET1 ratio to changes in exchange
validating management buffers applicable to the aforementioned
monitoring the impacts of global stress test results,
monitoring the implementation of the supervisor's decisions that
have an impact on the Group's solvency ratio or the amount of its
The Capital Committee is also the Group's competent Executive
Management authority for all issues related to the internal credit and
operational risk model and the methodologies used in the ICAAP.
Capital management at the consolidated level rests on the following
\u25a0 the solvency ratios:
BNP Paribas uses the CET1 ratio as its main internal capital
\u25a0 risk-weighted assets:
The risk-weighted assets are calculated per business line and per
type of risk. The change in risk-weighted assets is analysed per type
of effect (in particular: volume effect, parameters effect, perimeter
effect, currency effect and method effect);
\u25a0 the leverage ratio:
It reports the amount of Tier 1 capital to a measure of both on- and
off-balance sheet exposures using a prudential approach. In particular,
derivatives and repurchase agreements are adjusted;
The capital allocation transfers the capital constraints to all Group
divisions and thus represents a major constraint concerning the
Group's development and management. The evaluation of the business
lines' performance includes the analysis of their pre-tax Return On
Notional Equity (RONE) indicators. The equity component of this
ratio is the notional equity, which corresponds to the business lines'
This management rests on two major processes which are closely linked:
\u25a0 a detailed quarterly analysis of actual capital consumption by
divisions/business lines and of the Group's solvency ratios, as well as
quarterly forecasts of these indicators throughout the year;
\u25a0 the yearly budget process, which plays a central role in the strategic
CAPITAL MANAGEMENT AT LOCAL LEVEL
The Group has to allocate available capital among its different entities.
To ensure a free and efficient flow of capital throughout the Group,
the capital allocation process within the Group is centralised at head
office level. It is mainly based on two principles: compliance with local
regulatory requirements and analysis of the local business needs of the
entity and growth prospects. In line with these two principles, the aim
is to minimise capital dispersion.
Local Chief Financial Officers are responsible for the daily management
and reporting of their subsidiaries' capital requirements. When a capital
need arises, it is analysed on a case-by-case basis by dedicated teams at
Group level, taking into consideration the subsidiary's present position,
its future strategy as well as the Group's one in the relevant country,
the entity's growth prospects and the macroeconomic environment.
Furthermore, each year, the Group manages the subsidiaries' earnings
repatriation process. The Group general policy stipulates that the entire
distributable profit of every entity, including retained earnings, must be
paid out. This policy ensures that the capital remains centralised at
the BNP Paribas SA level and also contributes to reducing the foreign
exchange risk. Exceptions are considered on a case-by-case basis.
Local Chief Executive Officers are responsible for ensuring the subsidiary's
ongoing financial viability and competitiveness in terms of capital,
where relevant. However, any capital action requested by a subsidiary is
assessed by and subject to authorisation from head office.
In addition, every year the Group examines the branches' capital
allocations in order to maintain an adequate level of capital in light of
the different regulations.